Payroll Tipped Employee Medicare Social Security Federal Credit

[Bob19]

We have tipped employees.  On our Federal Income tax return we are able to receive a credit on our tax return for the amount of employer  Medicare and Social Security that was paid during the year on the tipped income on employees that paid above 5.15 per hour in hourly wage income plus tip average per hour.  I am trying to determine if Square makes available a report that would provide a summary of all tipped employees hourly and  the amount of Medicare and Social Security paid for those employees in excess of the hourly wages paid or 5.15 and hour including wages plus tips.

This saves us about 9,000 a year in taxes.  Most other Payroll vendors provide this report as part of their payroll costs.  I have searched all over you system and cant find anywhere that address this issue.  This is a show stopper for us.

[TheRealChipA]

Hi @Bob19.  Square Payroll does not have this report.  I tried searching to see if there was already a feature request submitted that you could add your support to.  But, it doesn’t look like there is.  So, first, I’d recommend that you submit a feature request to the Payroll Team here.  They will review it and let you know their decision.

I talked to my CPA about this when I switched to Square Payroll from Gusto.  In my case, I learned that I don’t really need the report because:

1. All of my tipped employees are paid a base rate of much more than $5.15 per hour.  He pointed out that according to this IRS instructions quote “If you pay each tipped employee wages (excluding tips) equal to or more than $5.15 an hour, enter zero on line 2.” Line 2 of form 8846 is excluded wages and since we don’t pay any employee the federal tipped minimum of $2.13 per hour, we have no excluded wages.
2. None of our tipped employees exceed the social security tax wage base of $147,000 and so line 4 of form 8846 doesn’t apply to us, either.

Therefore, since all tips are creditable and no social security adjustments are needed, our form 8846 is very simple and doesn’t need a report like this.  If you are in the same boat, the fact that Square doesn’t have this shouldn’t be a show stopper at all since, like me, your form 8846 should consist of just a couple of plugged-in numbers.

If, however, you have employees whose base hourly rate is less than $5.15 per hour, then the only suggestion I could make (besides submitting that feature request) is to create a spreadsheet that you download your Square Payroll CSV to, and then do the calculations necessary to arrive at the tip credit.  I know one person who does this and doesn’t see it as a problem since he has it all set up now and only has to import a new annual Payroll CSV.  That might work for you while you wait for Square to add this report.

Otherwise, if this missing report is something that you just can’t be without from your Payroll provider, I’d recommend using one of the third party app in the Square Marketplace that integrate with Square Shifts and Team — like Gusto.

[TheMiniDonutCo]

Did you ever make that feature request @Bob19 ? I'm looking for the same thing.