Vincent is a tipped employee who earns a wage of $2.13 per hour in a tip-credit state and works a standard 40-hour workweek.Last week,he earned $60 in tips.Which of the following is true?
A)Vincent does not have to report his tips for the week because they were less than $75.
B)Vincent's employer may not report his tips for income tax purposes.
C)Vincent's employer must pay him the tip credit because his wages and tips for the week were less than the federal minimum wage.
D)Vincent must file a request with his employer to have the tip credit applied to his wages for the week.

Question

Quizplus · Accepted Answer

In a tip-credit state, the employer is allowed to pay a lower minimum wage to tipped employees as long as their tips bring their total hourly wage up to the federal minimum wage. In this case, Vincent's hourly wage including tips was less than the federal minimum wage, so his employer must make up the difference and pay him the tip credit. Vincent must report his tips for income tax purposes and there is no need to file a request to have the tip credit applied. Option A is incorrect because all tipped income must be reported, regardless of the amount. Option B is incorrect because the employer must report all tipped income for income tax purposes.

Vincent Is a Tipped Employee Who Earns a Wage of $2.13