These topics are covered:

Tips employees receive from customers are generally subject to withholding. Employees must report cash tips to the employer by the 10th of the month after the month the tips are received. The report should include tips the employer paid to the employee for charge customers and tips employees received directly from customers. No report is required if tips are less than $20/month.

Employers must collect income tax, employee Social Security tax, and employee Medicare tax on the employee's tips. The employer is responsible for the employer Social Security tax on wages and tips until the wages reach the limit. Employers are responsible for the employer Medicare tax for the whole year on all wages and tips.

For additional information on reporting tips and taxes, consult the Internal Revenue Service (IRS) website using this link:

Employees must keep a daily record to:

• report tips accurately to the employer.
• report tips accurately on the tax return.
• prove tip income if the tax return is ever questioned.

Employees must report tips so the:

• employer can withhold the appropriate taxes.
• employer can report the correct amount of earnings to the Social Security Administration.
• employee can avoid the penalty for not reporting tips to the employee.

Several IRS publications cover this topic in more detail. See Publication:

• 531 Reporting Tip Income
• 1244 Employee's Daily Record of Tips and Report to Employer
• 1872 A Guide to Tips Income Reporting for Employees in the Food and Beverage Industry

Additional publications are also referenced at this link:

Normally, deductions represent voluntary withholding of specific amounts from employee net pay for precise purposes. In the Ceridian Payroll System (Signature), deductions have a broader function. For example, deductions are used to enter amounts subject to some but not all taxes such as meals and tips.

These deduction descriptions are reserved for various components of tips reporting:

Description	Component
TIPSx	Tips
TPCR	Tips Credit
W2ATP	Allocated Tips

These deductions must be set up as valid deductions in the Deduction table in the Ceridian Payroll System (Signature) and your Ceridian payroll product.

An explanation of each reserved deduction description follows:

• TIPSx
  This description is used to enter cash tips, or charge tips that are treated as cash tips, subject to employee withholding and employer liabilities. If you have employees in several states where tips are taxed differently or if you need to track food tips, beverage tips, and other types of tips separately, you need multiple TIPS deductions. To accommodate this, add a suffix to the description such as TIPSA, TIPSB, TIPSC and so forth. Each deduction description must be in the Ceridian Payroll System (Signature) and Ceridian payroll product Deduction tables.
  
  When you set up TIPS or TIPSx in the Ceridian Payroll System (Signature) Deduction table, Ceridian recommends that you use 01 for PRIORITY.
  
  If you use Ceridian HR/Payroll, Ceridian HR/Payroll Web, or Ceridian HR/Payroll Latitude, when you set up TIPS or TIPSx in the Deduction table on your PC, select Deduction - Other for Deduction Type to have the deduction treated correctly when it is entered on Xpresschecks.
  
  If you treat charge tips as earnings not cash tips, see Charge Tips Paid and Reported as Earnings Not Cash Tips in these sections later in this document:

• Other Functions of Tips Reporting Through Deductions
• Coding Techniques

St. Louis Payroll Expense Tax (PET) wages are adjusted for tips as indicated:

• If the employee has TIPSx amounts on a check and the TIPSx amounts are taxable for local wages, the PET wages are reduced.
• If TIPSx amounts are present and taxable for local wages, the employer wages are reduced by the TIPSx amount that is reported.
• If the check is a void check, the wages are increased.
• If the TIPSx amounts aren't taxable, no adjustment is needed.

• TPCR
  If you apply a tip credit toward the regular rate paid to an employee, this deduction must be set up in the Ceridian Payroll System (Signature) and Ceridian payroll product Deduction tables. In some cases, the Ceridian Payroll System (Signature) uses this description to capture and display the tips credit portion of reported employee tips for which the employer is liable for state UC payments.
  
  When setting up TPCR in the Ceridian Payroll System (Signature) Deduction table, Ceridian recommends making these selections for deduction options 00 and 06:

Option	Description	Y/N	Freq Codes
00	Restore Flex-to-Date 1 Amount	Y	EP
06	Print Year-to-Date on IDR	Y

If you use the Minimum Wage for Tipped Employees feature

Setting up TPCR in the Ceridian Payroll System (Signature) Deduction table, automatically:

• sets up the deduction for all minimum wage tipped employees (that is employees with T for Base Rate Code).
• posts the current amount of tips credit calculated to this deduction.
• updates quarter-to-date and year-to-date employer liability wage base amounts.

You might require an alternate tip credit if you use the Minimum Wage for Tipped Employees feature, and state law, union contract or another factor requires a tip credit rate that differs from the federal maximum. The Ceridian Payroll System (Signature) uses the federal maximum allowable tip credit unless you specify an alternate tip credit.

Tips credit increases to $5.12 per hour on July 24, 2009. Before this tips credit was last raised to $4.42 per hour effective July 24, 2008.

It is crucial to specify an alternate tip credit higher than the federal maximum only when the guaranteed hourly rate for all tipped employees is proportionally higher than the federal minimum wage. Otherwise, applying a higher tip credit rate could cause the Ceridian Payroll System (Signature) to generate insufficient make-up pay for federal minimum wage tipped employees.

The format for entering alternate tip credit is $x.xxxx per hour. For example, an entry of 1.6500 establishes a maximum tip credit rate of $1.65 per hour.

If the minimum wage for tipped employees feature is used (option 160-00 is Y), don't assign a different TPCR rate for any employee. If you do, the Ceridian Payroll System (Signature):

• uses the system assigned default rate, or the alternate TPCR rate if one is defined for the company, in its minimum wage/average hourly rate calculations.
• inflates the total TPCR displayed on reports by combining the actual TPCR used in the minimum wage/average hourly rate calculation with the calculated TPCR defined for the employee. The inflated amount could cause TPCR to exceed TIPSx amounts, which would result in Wage and Tax audit messages.

If different TPCR rates are required, for states with a higher minimum wage as one example, you must set up a separate payroll service ID (PSID) for each rate.

If you don't use the minimum wage feature

Setting up TPCR in the Ceridian Payroll System (Signature) Deduction table gives you full flexibility to:

• enter TPCR as a unit rate per hour.
• manually calculate and post a tips credit amount.

Employee entries for TPCR must have an S2 code of M or N.

• W2ATP
  
  This description is used to identify and display the shortfall between the total of the actual tips reported and the minimum amount equal to a percentage of total related food and beverage sales. When entered, this amount displays in the appropriate box on the W2. This is a memo type deduction requiring an S2 code of M or N.

Banquet Tips (Gratuities)

If employees receive banquet tips (gratuities), you can enter these tips using a deduction of your choice or through hours and earnings entries. If you use the Minimum Wage for Tipped Employees feature, you must use hours and earnings entries. See Coding techniques for banquet tips later in this document for additional information.

Charge Tips Paid and Reported as Earnings Not Cash Tips

If employees receive charge tips and you pay and report these amounts as earnings, not cash tips, you can enter these tips using a deduction of your choice or through hours and earnings entries. Most employers pay these types of charge tips through hours and earnings. See Coding techniques for charge tips paid and reported as earnings later in this document for additional information.

Meals

If you furnish meals to employees and those meals are taxable, you can set up a deduction description of your choice, MEALS for example, for reporting the value of these meals. See coding techniques for meals later in this document for additional information.

The techniques in this section are examples only and may not meet the specific needs of your organization. Contact your Ceridian representative for help in developing coding procedures that satisfy your unique reporting requirements.

Banquet Tips (Gratuities)

The amounts for services the hotel or restaurant adds to the bill (normally as a percentage of charges) are fully taxable as wages earned for both the employer and employee. For this reason, don't use TIPS or TIPSx to record these amounts.

These methods are available for entering banquet tips:

1. Submit the amount as a pay code 9x hours/earnings entry. You can personalize the description for this pay code to Banquet Tips for display in the Hours and Earnings section of the earnings statement.

If you use the Minimum Wage for Tipped Employees feature, you must enter banquet tips as hours/earnings. Ceridian recommends reserving pay code 9x for this purpose.

Pay Code	Hours	Rate Code	Earnings
9B		E	35.00

2. Set up and use a deduction of your choice, BTIPS or GRATS for example, for reporting these amounts. Typically, an S2 code of 1 is used because it indicates that the amount is fully taxable for both the employer and employee.

Description	Amount	Status
BTIPS	35.00	01T

Charge Tips Paid and Reported as Earnings Not Cash Tips

Charge tips are the amounts paid by credit card instead of cash left on the table. Some employers treat these amounts as earnings - rather than cash tips - and pay the amounts to employees on the check.

These methods are available for entering charge tips that are paid and reported as earnings:

1. Submit the amount as a pay code 9x hours/earnings entry. You can personalize the description for this pay code to Charge Tips for display in the Hours and Earnings section of the earnings statement.

If you use the Minimum Wage for Tipped Employees feature, you must enter charge tips as hours/earnings. Ceridian recommends reserving pay code 9x for this purpose.

Pay Code	Hours	Rate Code	Earnings
9C		E	50.00

2. Set up and use a deduction of your choice, CTIPS or CHRG for example, for reporting these amounts. Typically, an S2 code of 1 is used because it indicates that the amount is fully taxable for both the employer and employee.

Description	Amount	Status
CTIPS	35.00	01T

Meals

You can establish an amount per meal or per hour for the value of meals that are taxable.

The taxability of meals for FICA, FUTA, SDI/UC, and SIT is affected by whether or not the meals are provided to the employees for the employer's convenience. As with all tax matters, it is up to you to determine and specify whether to tax meals in these categories.

Meals aren't FIT taxable and generally aren't taxable for local income tax. The deduction description in these examples is arbitrary. However, MEALS is most commonly used.

In this example, the meals entry is recorded as a temporary amount. The S2 code of B indicates that the amount is SDI/UC taxable.

Description	Amount	Status
MEALS	15.00	0BT

Where permitted, you could calculate meals as a rate per hour to reduce clerical effort by eliminating the need to enter a temporary amount each period.

Tips (TIPSx)

Cash tips, including charge tips that you treat as cash tips, are taxable for FIT, FUTA, and FICA. Taxability varies by state for both income tax and employer/employee SDI/UC.

In the Ceridian Payroll System (Signature), the description TIPS or TIPSx and status code determines taxability. The S2 position of the status code defines how to tax the amount.

S2 Code	Taxability
5	FIT, FICA, FUTA
6	FIT, FICA, FUTA, SIT, LOCAL
7	FIT, FICA, FUTA, SIT, LOCAL, SDI/UC
8	FIT, FICA, FUTA, SDI/UC

These examples use the description TIPS. If you have employees in several states where tips are taxed differently or if you need to track food tips, beverage tips, and other types of tips separately, you can define multiple descriptions such as TIPSA, TIPSB and so forth.

• Tips can be actual amounts employees receive in cash from customers and report as temporary amounts.

Description	Amount	Status
TIPS	30.00	07T

• Where permitted, calculate tips as a rate per hour to reduce clerical effort by eliminating the need to make temporary entries as illustrated previously.

Description	Amount	Status
TIPS	4.42	G70

If you are unable to collect the full amount of Social Security and Medicare tax on tips due to insufficient wages, you have the option to report the uncollected tax on the W-2 statement. Selecting company option 805-01 provides this function.

Tips Credit (TPCR)

Tips credit is the amount of reported tips deemed as wages whenever needed to reach an employee's guaranteed hourly rate. The maximum amount allowable is an established percentage of the statutory minimum wage per hour.

If you apply a tips credit amount toward the guaranteed rate paid to an employee, you, the employer, are liable for state UC payments on the tips credit amount. In most cases employer state UC liability is calculated using wages paid plus tips. UC liabilities are based on a limit.

If you use the Minimum Wage for Tipped Employees feature (company option 160-00 is selected), tips credit amounts are determined automatically.

If you don't use the Minimum Wage for Tipped Employees feature (company option 160-00 isn't selected), these are examples of procedures that you could use to determine employer liabilities for tips credit amounts. You must use the description TPCR with an S2 code of M or N.

• Tips credit amount entered each period as temporary (one-time).

Description	Amount	Status
TPCR	30.00	0MT

• Where permitted, calculate tips credit as a rate per hour to reduce clerical effort by eliminating the need to make temporary entries as illustrated previously.

Description	Amount	Status
TPCR	4.42	GM0

Take care to ensure that the TPCR amount entered or calculated is never greater than actual tips reported.

Allocated Tips (W2ATP)

The allocated tips amount is for reporting purposes only. Therefore, you must use an S2 code of M or N. This is a typical entry to record allocated tips as a temporary amount:

Description	Amount	Status
W2ATP	10.00	0MT

When entered, allocated tips appear in the appropriate box on the W-2 statement.

This information is intended to help you understand how these various items function in Ceridian Payroll System (Signature). The examples at the end of this section illustrate how the various calculations are performed.

You must select company option 160-00 to:

• apply a tip credit and other value-received items that are FICA taxable and not FIT taxable to the cash wages due employees.
• pay overtime premium for all employees at an average hourly rate.

Automatic Calculation of Minimum Wage for Tipped Employees

Minimum wage is calculated for tipped employees when:

• company option 160-00 is selected.
• tipped employees are identified with T in Base Rate Code.

The calculation:

• determines the applicable tips credit amount.
• applies tips credit and other value-received items to the cash wages due the employee.
• generates makeup pay, if necessary, to bring the employee up to the total guaranteed hourly rate.
• pays overtime premium for all employees at an average hourly rate.

Average Hourly Rate

The Ceridian Payroll System (Signature) computes an average hourly rate used to calculate overtime premium for all employees with manually entered hours (whether a minimum wage tipped employee or other). The Ceridian Payroll System (Signature) divides gross earnings by the applicable hours to determine the average hourly rate.

Overtime premium for these employees is determined as follows:

• Pay code 5x hours are paid at one-half the average hourly rate.
• Pay code 6.x hours are paid at the average hourly rate.

Option 160-00 gross earnings consist of earnings from pay codes 1x, 2x, 3x, 4x, and 9x only.

Applicable hours (i.e. those used to determine the average hourly rate) generally consist of hours from pay codes 1, 2, 3, and 4 only. However, company options 160-01 through 160-05 give you the flexibility to exclude pay code 2x, 3x, 4x in any combination, and value received items such as meals from the calculation.

Coding Considerations

To calculate a minimum wage / average hourly rate:

• All tipped employees must be identified with T in Base Rate Code.
• The base rate must be the employee guaranteed hourly rate including earnings, meals, tips and so forth. Typically, this is either the federal or state minimum wage. However, it could be any rate that is higher than the minimum wage.
• If the employee is also guaranteed a certain amount of cash wages per hour, enter this amount as the A rate.
• You must enter total hours worked, including overtime hours, with a pay code of 1x, 2x, 3x, 4x, or Mx to indicate Regular pay. Going forward this group of pay codes is referred to as Pay Group 1. If you enter Pay Group 1 hours:

• without a rate code or pre-calculated earnings, the entry generates no pay; these entries are used to calculate the minimum wage.
• with a rate code or pre-calculated earnings, the resulting amounts are included with any incentive (pay code 9x) earnings for the minimum wage calculation.

• Enter overtime hours separately as pay code 5x or 6x without a rate code.
• Enter meals and value-received items with the appropriate deduction description and S2 code.
• Enter tips amounts with the appropriate TIPSx deduction description, the amount in dollars and cents format (xx.xx), and the appropriate S2 code.

These hours and earnings are always excluded from the minimum wage calculation:

• Earnings entered as Other Deductions and Adjustments (often referred to as Earnings from Deductions).
• Hours and earnings generated from the forecast.
• Hours and earnings entered with pay codes 5x, 6x, Hx, Dx, Vx, 7x, and 8x.
• Labor only entries (adjustment code L or Y).

You can optionally exclude vacation (pay code 3x), holiday (pay code 2x), and sick (pay codes 4x and Mx) hours and earnings from this calculation in any combination through option selection.

The Ceridian Payroll System (Signature) doesn't use pay code 9x hours to calculate tips credit. However, it does include these entries in hours as earnings.

Considerations for Paying Overtime to Non-Tipped Employees

As stated earlier, the Ceridian Payroll System (Signature) computes an average hourly rate used to calculate overtime premium for all employees with manually entered hours. To bypass this function for non-tipped and non-minimum wage employees (employees with a Base Rate Code other than T or M) and pay:

• overtime at 1.5 times the base rate, enter regular hours (40.00 for example) as pay code 1x and overtime hours (8.00 for example) as pay code Hx with a rate code of 7.
• doubletime at 2 times the base rate, enter regular hours (40.00 for example) as pay code 1x and doubletime hours as pay code Dx with a rate code of 8.

Calculating Minimum Wage for Tipped Employees

This section gives you insight to the steps the Ceridian Payroll System (Signature) takes to calculate minimum wage for tipped employees.

1. Determines the maximum tips credit using option 160-xx hours x 4.42 or alternate tips credit.
2. Compares the maximum tips credit to reported tips (TIPSx entries) to determine the amount of tips credit (TPCR) to apply. The difference between TIPSx and TPCR is TIPSEX.
3. Determines the guaranteed earnings using option 160-xx hours x base rate.
4. Computes submitted earnings using Pay Group 1 hours x rate code entered or earnings posted for Pay Group 1.
   
   If no rate code or earnings are entered for Pay Group 1, no earnings are generated for Pay Group 1.

+	Option 160-xx hours x applicable rate
+	Meals (value-received items that are FICA and not FIT taxable
+	TPCR
+	Pay code 9x earnings
=	Submitted earnings

5. Compares submitted earnings to guaranteed earnings.
6. Generates MAKEUP pay to bring submitted earnings up to guaranteed earnings or adjusts TPCR down to the amount the employer actually took toward the employees guaranteed earnings.
   
   Also adjusts TIPSEX to reflect the difference between TPCR applied and TIPSx reported.
7. For overtime, determines the average hourly rate by dividing gross earnings from step 6 by option 160-xx hours. Uses:

• one-half the average hourly rate for pay code 5x overtime.
• the average hourly rate for pay code 6x doubletime.

Option 160-00 gross earnings consist of earnings from pay codes 1x, 2x, 3x, 4x, and 9x only.

8. If the option to exclude TPCR from the overtime calculation isn't selected, determines the tips credit per hour by dividing TPCR applied (from step 7) by option 160-xx hours.
9. Adds the results of step 7 and step 8 together to determine the overtime rate.

Reporting Earnings for Tipped Employees

Employers are required to maintain detailed payment records for minimum wage tipped employees. If you use this feature, Ceridian recommends that you have your Ceridian representative define a Labor Distribution Employees Detail report to provide this information. See the Minimum Wage for Tipped Employees section earlier in this document for details about this feature.

The entries that appear on the employee detail labor distribution report are:

• MEALS
  This is an arbitrary designation and has no connection with the actual deduction description used. It is the total of all deduction entries with an S2 code of 3, 4, A, H, J, or R, which are subject to FICA and not FIT.

• TIPSCR
  This is the amount of tips credit actually applied toward the statutory minimum wage. It is calculated from the sum of all TIPSx entries reduced to:

• the maximum tips credit if less than TIPSx entries
• the tips credit you actually took toward the employee's guaranteed earnings if the tips credit caused total earnings to exceed guaranteed earnings.

• TIPSEX
  This is the difference between TIPSx and TIPSCR. This amount displays only to help in balancing. The amount has no effect on wage calculations. You saw reference to TIPSEX in the Minimum Wage for Tipped Employees section earlier in this document.

• MAKEUP
  Any makeup pay generated and paid on the employee's check. Example 3 illustrates a case where make up pay is generated.

On earnings statements and Pay Analysis (PAR) reports, makeup pay is combined with pay code 1 earnings. To show makeup pay separately on PAR, Individual Deduction Registers and/or database reports, you could set up a memo deduction of choice (MAKE or MAKUP for example) for each tipped employee. Be mindful that this deduction must be set up as a valid deduction in the Deduction table in Ceridian Payroll System (Signature) and your Ceridian payroll product.

Description	Amount	Status
MAKE	100.00	PM0

Tips on Wage and Tax Report and Wage and Tax Audit Report

When tips are paid, the tips amount is added to taxable wages and taxed based on the S2 code. However, the tips amount isn't included in Social Security, Medicare, FIT, and FUTA wages on the Wage and Tax report and the Wage and Tax Audit report. On W-2 statements and the W-2 Management report, the tips amount is included in Medicare, FIT, and FUTA wages but not in Social Security wages. The tips amount is shown separately in box 7 Social Security tips. Social Security wages (excluding tips) is shown in box 3.

If you use an S2 code that affects SIT, UC, or local wages, the tips amount is included in the respective wages on the Wage and Tax report, Wage and Tax Audit report, W-2 statements, and W-2 Management report.

Examples of the Minimum Wage Calculation for Tipped Employees

These examples illustrate the calculation of tips credit assuming a federal minimum wage of $7.25 per hour and a maximum tip credit of $5.12 per hour.

Examples 1 and 2 use the federal minimum wage per hour as the employee's guaranteed earnings. Example 3 uses a different guaranteed earnings.

All of these examples show how MEALS, TIPCR, and TIPSEX entries appear on the Labor Distribution Tipped Employee Report discussed earlier in the Reporting Earnings for Tipped Employees section.

Example 1:

The employee worked 40 hours, had $25.00 in meals, and $208.00 in tips. No earnings amount was submitted. The employee's base rate is T7.2500.

The base rate is used to determine guaranteed earnings, which is typically either the federal or state minimum wage.

Hours and Earnings	************ Deductions ************
1        40.00	MEALS              25.00         03T  TIPS                208.00         07T

Calculation

Maximum tips credit	=	40 x $5.12	=	$204.80 (less than reported tips)
Guaranteed earnings	=	40 x $7.25	=	$290.00
Submitted earnings  + Meals + Tips credit  Total		.00 $  25.00 $  25.00 $204.80 $229.80		Posted to deduction description TPCR Versus $290.00 guaranteed
Makeup pay is generated		$60.20		Paid on the employee's check

The labor distribution report would reflect this information:

Charge to:	Pay Code	Hours	Earnings
(Home Department)	1	40.00
MAKEUP	1		60.20
MEALS	9		25.00
TIPSCR	9		204.80
TIPSEX	9		3.20

Example 2:

The employee worked 48 regular hours and 8 hours of overtime for a total of 56 hours. The employee had $290.00 in regular earnings, $25.00 in meals, and $110.00 in tips. The employee's base rate is T7.2500.

Notice that the pay code 1 entry reflects total hours worked, including overtime (56.00). The pay code 5 entry reflects the overtime hours (8.00).

Hours and Earnings	************ Deductions ************
1     56.00     $290.00	MEALS               25.00         03T
5      8.00	TIPS                  110.00        07T

Calculation

Maximum tips credit	=	56 x $5.12	=	$286.72 (exceeds reported tips)
Actual tips credit is			=	$110.00 Actual tips credit is the lesser of tips credit or actual tips. In this case, reported tips is less.
Guaranteed earnings	=	56 x $7.25	=	$406.00
Submitted earnings  + Meals + Tips credit  Total		$290.00 $  25.00 $110.00 $425.00		Versus $406.00 guaranteed

Because $425.00 exceeds the guaranteed earnings, the tips credit is reduced to the amount you actually took toward the employee's guaranteed earnings:

$425.00 -406.00 $  19.00	Earnings with full tip credit    Guaranteed earnings   Reduction in tips credit
$110.00     -19.00 $91.00	Full tips credit   Reduction to tips credit   Actual tips credit after reduction

The final wage calculation is:

$290.00 +25.00     91.00 $406.00

Submitted earnings   Meals   Tips credit posted to TPCR   Guaranteed earnings for 56 hours

If option 160-05 Exclude TPCR from Overtime Calculation isn't selected (is set to N), overtime is calculated as:

Average hourly rate Tips credit per hour	= =	$ 7.25 x 0.5 $91.00 / 56	= =	$ 3.625  $ 1.625  $ 5.250
Overtime rate per hour x 8 hours overtime	=			x        8
Overtime earnings paid on check	=			$42.00

If option 160-05 Exclude TPCR from Overtime Calculation is selected (is set to Y), overtime is calculated as:

Average hourly rate Exclude tips credit	= =	$7.25 x 0.5	= =	$ 3.625  $ 0.000  $ 3.625
Overtime rate per hour x 8 hours overtime	=			x        8
Overtime earnings paid on check	=			$29.00

The labor distribution report reflects this information:

Charge to:	Pay Code	Hours	160-05 is NO Earnings	160-05 is YES Earnings
(Home Department)	1	56.00	290.00	290.00
MEALS	9		25.00	25.00
TIPSCR	9		91.00	91.00
TIPSEX	9		19.00	19.00
(Home Department)	5	8.00	42.00	29.00

Example 3:

This example illustrates the calculation of makeup pay. This example assumes a federal minimum wage of $7.25 per hour and a maximum tip credit of $5.12 per hour.

The employee worked 40 hours, had $15.00 in meals, and $60.00 in tips. The employee is guaranteed $6.00 per hour including tips and at least $4.00 per hour in cash wages. Notice in this example the employee is guaranteed more than the federal minimum hourly wage.

The employee's base rate is T6.0000. The employee's A rate is 4.0000.

Hours and Earnings	************ Deductions ************
1     40.00     A	MEALS              15.00         03T TIPS                  60.00         07T

Calculation

Maximum tips credit	=	40 x $5.12	=	$204.80 (exceeds reported tips)
Actual tips credit is			=	$  60.00 is used (reported tips is used because it is the lesser of reported tips and maximum tips credit)
Guaranteed earnings	=	40 x $6.00	=	$240.00
Submitted earnings + Meals + Tips credit Total		$160.00 $  15.00 $175.00 $  60.00 $235.00		40 x $4.00 A rate Posted to TPCR Versus $240.00 guaranteed
Makeup pay is generated		$   5.00		Paid by check

 The labor distribution report would reflect this information:

Charge to:	Pay Code	Hours	Earnings
(Home Department)	1	40.00	160.00
MAKEUP	1		5.00
MEALS	9		15.00
TIPSCR	9		60.00

Information needed to calculate the business tax credit is available through data base fields for tips (TIPSx) and tip credit (TPCR) deductions. However, you must meet these requirements to ensure the data fits into the tax credit's calculation structure:

• use the reserved TIPSx deduction descriptions to enter tips.
• segregate food and beverage tips from other types of tips. To accommodate this, add a suffix to the description. For example: TIPSF for food tips, TIPSB for beverage tips. TIPS for other types of tips. Be mindful that each deduction description must be set up in the Deduction table in Ceridian Payroll System (Signature) and the Ceridian payroll product.
• set up the tip credit deduction (TPCR) in the Ceridian Payroll System (Signature) Deduction table. If you use the Minimum Wage for Tipped Employees feature, the Ceridian Payroll System (Signature) automatically calculates the tip credit. Otherwise, you must manually enter the tip credit amount.

The basic calculation is:

(TIPSx - TPCR) * 7.65%

=

Credit Amount

It is necessary to add individual food and beverage tips together for the credit calculation

Information available on the tax credit doesn't explain how to handle tip credit for employees receiving food, beverage, and other types of tips. If your employees receive all three types of tips, you must determine how to handle tip credit within the business tax credit calculation. Options include using all of TPCR or just a portion of TPCR in the calculation. Consult with your CPA or other tax advisor when evaluating available options.

Wage attachment deductions represent the collection of specific amounts from employee net pay to recover outstanding debts. Wage attachment deductions have unique descriptions you must use when establishing the deduction in the Deduction table in Ceridian Payroll System (Signature) and the Ceridian payroll product, and subsequently for employees.

Disposable Income

Disposable income for wage attachments is defined as gross pay minus deductions required by law. In the Ceridian Payroll System (Signature):

• the definition of disposable income translates into gross pay minus taxes.
• tips are considered part of gross pay.

State Disposable Income Exceptions

Although it is generally understood that tips are considered wages, you can optionally exclude tips from gross pay to meet your specific needs. To do this, you must set up state disposable income exceptions for each state with wage attachments.

If you need help setting up state disposable income exceptions, contact customer service.

If you are unsure about whether to include or exclude tips from gross pay for wage attachments, consult with your CPA or other tax advisor.