Everything you need to know about the FICA Tip Credit, eligibility rules, calculating your refund, and how our process works.
The FICA Tip Credit (officially IRS Section 45B) is a federal tax incentive created in 1993 to encourage accurate tip reporting in the hospitality industry.
It provides employers with a dollar-for-dollar tax credit that refunds the employer's portion of Social Security and Medicare (FICA) taxes paid on employee tips that exceed the federal minimum wage threshold.
It is a tax credit, which makes it significantly more valuable than a standard deduction.
A deduction only lowers your taxable income. A tax credit provides a dollar-for-dollar reduction of your actual tax liability. Every dollar calculated for the FICA tip credit is a full dollar you do not have to pay the IRS.
No, the ERC and the FICA Tip Credit are completely different programs. The ERC was a temporary COVID-19 relief program. The FICA Tip Credit is a permanent part of the tax code that has existed since 1993.
You can absolutely claim both. In fact, many of our clients use the FICA tip credit as a reliable, ongoing annual strategy after their one-time ERC funds have been depleted.
Any business that employs tipped workers and pays the matching employer FICA taxes on those reported tips is likely eligible.
While most commonly used by restaurants and bars, recent IRS guidance has expanded the scope. Hotels, resorts, hair salons, nail spas, and delivery services are all eligible to claim this credit.
Yes, absolutely. This is the most common misconception business owners have.
Even if you pay your servers or stylists $15/hour base pay, you still get the tax credit on the FICA taxes you pay for the tips they receive. The base wage they earn does not disqualify their tip income from generating the credit.
We hear this daily. Most CPAs are brilliant at general tax strategy, but Section 45B requires granular, line-by-line payroll calculation on a per-employee, per-pay-period basis.
Standard tax software cannot perform this math automatically. Because it is highly tedious and requires specialized payroll data extraction, many excellent CPAs simply overlook it or assume you don't qualify to avoid the manual math. Fica.Credit exists specifically to handle this complex calculation for your CPA.
Technically, it is a non-refundable General Business Credit. This means it cannot reduce your current year's tax liability below zero to trigger an immediate cash refund. However, the IRS provides very generous carry rules.
You can carry excess credits backward 1 year to get a cash refund on taxes you already paid. If you still have credits leftover, you can carry them forward for up to 20 years to eliminate future tax bills.
The IRS allows you to file an amended return (Form 1040-X or 1120-X) to claim retroactive credits for up to three prior tax years. For many businesses, combining three years of missed credits results in a massive cash recovery.
Not at all. The FICA tip credit strictly benefits the employer. It has zero impact on your employees' wages, their personal tax filings, or their future Social Security or Medicare benefits.
There is zero upfront cost. We work exclusively on a contingency basis, meaning our fee is a small percentage of the credit we successfully calculate and secure for you.
If we review your payroll and determine you don't qualify or there is no credit to claim, you owe us absolutely nothing. You take on zero financial risk.
No! We do not replace your CPA or your payroll company; we act as their specialized partner. We do the heavy lifting of extracting the payroll data, performing the complex line-by-line math, and preparing the official IRS Form 8846.
Once complete, we hand a perfectly organized, filing-ready packet over to your CPA so they can easily attach it to your tax return.
Claiming a legal, well-established tax credit does not inherently increase your audit risk. However, it is crucial that your calculations are accurate and backed up by detailed payroll records.
Every claim prepared by Fica.Credit comes with a comprehensive payroll methodology report. In the highly unlikely event the IRS has questions, we provide full defense support at no additional cost.
Our tax specialists are available to review your specific business structure and answer any questions you have with zero obligation.
Join 3,400+ hospitality businesses that have recovered over $128 million in FICA tip tax credits. Free estimate, no obligation, no risk.