FICA tax tip credit
From Wikicpa
The FICA Tax Tip Credit under Section 45B for tips received by employees equals the employer’s social security and Medicare tax obligations on tips in excess of those treated as wages for minimum wage purposes. According to the IRS news release IR-2007-155 , although the federal minimum wage increased to $5.85 from $5.15 per hour, employers will still use the $5.15 rate to determine their allowable credit for tips reported for services performed after December 31, 2006. The new law also allows employers to offset their Alternative Minimum Tax with the Section 45B credit for tax years beginning after December 31, 2006. Previously, the credit could only be used against the employers’ regular tax liability.
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