The FICA tip credit, claimed on IRS Form 8846 under Internal Revenue Code Section 45B, is a federal business tax credit available to employers in the food and beverage industry. It offsets the employer-paid share of Social Security and Medicare taxes on employee tips that exceed the amount needed to bring the employee's wages up to the federal minimum wage.
How the Credit Is Calculated
The credit is based on the employer's FICA tax obligation on tips reported by tipped employees, minus any tips counted toward reaching the federal minimum wage. Occupational classification plays a role in this calculation: R365 uses SOC and TTOC codes at the job level to classify tipped positions for tax and wage reporting purposes.
Important Note About Form 8846 Preparation
R365 does not generate or file Form 8846. The credit calculation and filing are completed by the employer or its tax preparer using wage and tip data exported from R365.
R365 Data That Supports Form 8846
R365 does not provide a report built specifically for the FICA tip credit. To gather the figures needed for Form 8846, pull the Payroll by Pay Date report from Reports → Payroll Reports and review the Payment Detail tab, which lists Tip and Tip Credit earning lines along with the Social Security and Medicare tax amounts for the period.
Tip totals used in payroll originate from the Daily Sales Summary. Reviewing tip designations at the job level, and the wage and tip data already reported for other federal filings such as Form 8027, can help confirm the figures needed for the FICA tip credit calculation.