How to Calculate FICA Tip Tax Credit

How to Calculate FICA Tip Tax Credit
Calculating FICA Tip Tax Credit

Step 1

Locate all of your tipped employees' W-2s.

Step 2

Calculate each tipped employee's hourly wage plus the employee's average tipped wages. For example: $2.13 per hour + $8 = $10.13.

Step 3

Subtract the total hourly wage paid from the minimum wage. For tipped employees, this figure is $5.15, even though the federal minimum wage has increased. For example: $10.13 - $5.15 = $4.98. This is the hourly amount that is eligible for the FICA Tip Tax Credit.

Step 4

Multiply the hourly amount by the FICA rate. For example: $4.98 x 7.65 percent = 38 cents. For every hour that the employee works, you can take a 38 cent credit.

Step 5

Transfer this information to the IRS Form 8846 and attach to your tax return.