Tip Income

[AATPA]

Before starting, I have read the helpful threads here about tip income.

My client pays out credit card tip income at the end of each shift.  None is run through payroll.  Obviously 401(k) deferrals cannot be withheld from cash tips. (the election percentage is based on gross wages including tips, yes, the cash cannot be paid back to the employer to cover that withholding)  The question is, is the employer responsible for withholding from credit card tips if they cash them out on a per shift basis?  Would they not have to be considered similar to cash tips in that case?

They have a safe harbor plan and cannot exclude tips from the definition of compensation or from salary deferral election without it being discriminatory.

Their auditor states that they are required to hold on to those credit card tips until sufficient withholdings are met.  There are obviously times when the net check is zero prior to being able to withhold 401(k) contributions, or where the full election cannot be withheld.

Thanks in advance for any advice.

[dan654083]

I have the same problem with my employer.  Other than the replies here were you ever able to find any guidance.