Iowa Admin. Code r. 871-23.5 - Gratuities and tips
(1) Tips received by
an individual from a person or persons other than the individual's employer ,
and not accounted for to the employer , are not wages unless required by subrule
23.5(2). If the employee makes an accounting to the employer listing the tips
received, these tips must be reported to the department as total and taxable
wages. Where the customer writes the amount of the tip on a bill and the
employer pays the employee the amount so shown and charges it to the customer's
account, such amounts are wages.
(2) Tips are considered reportable and
taxable as wages when taken into account by the employer in determining the
employee's compensation under the federal wage and hour law, when paid by the
customer as a service charge set by the employer , or when pooled and
distributed to the employees by the employer . The employer shall keep
sufficient detailed records so that it can be ascertained, if necessary, by
audit or other authorized inspection which compensation is reportable as
taxable tips and which compensation is reportable as compensation other than
tips. For reporting purposes to the department, the tips and other reportable
and taxable compensation may be submitted in aggregate on Form 65-5300,
Employer's Contribution and Payroll Report .
(3) An accounting as used in this rule means
the reporting of tips as gratuities by an employee to the employer for the
purpose of deducting social security taxes or withholding taxes with the
employer reporting the same on Form 941, Employer 's Quarterly Federal Tax
Return.
This rule is intended to implement Iowa Code section 96.1A(40).
Notes
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(1) The following criteria shall be applicable in determining whether tips are wages under the contributions provision of the Act: Tips received by an individual from a person or persons other than the individual's employer , and not accounted for to the employer , are not wages unless required by subrule 23.5(2). If the employee makes an accounting to the employer listing the tips received, these tips must be reported to the department as total and taxable wages . Where the customer writes the amount of the tip on a bill and the employer pays the employee the amount so shown and charges it to the customer's account, such amounts are wages . Where the employer adds a certain percent to the customer's bill for disbursement to the employees, the sums so disbursed are wages .
(2) Tips are considered reportable and taxable as wages when taken into account by the employer in determining the employee's compensation under the federal wage and hour law, or when paid by the customer as a service charge set by the employer , or when pooled and distributed to the employees by the employer . The employer shall keep sufficient detailed records so that it can be ascertained, if necessary, by audit or other authorized inspection which compensation is reportable as taxable tips and which compensation is reportable as compensation other than tips. For reporting purposes to the department, the tips and other reportable and taxable compensation may be submitted in aggregate on Form 65-5300, Employer's Contribution and Payroll Report .
(3) An accounting as used in this rule means the reporting of tips as gratuities by an employee to the employer for the purpose of deducting social security taxes or withholding taxes with the employer reporting the same on Form 941, Employer 's Quarterly Federal Tax Return.