Are Tips Included in ERTC?

Yes, tips can be included in the calculation of qualified wages for the Employee Retention Tax Credit (ERTC) if they meet certain criteria[1][2][3][5]. 

Here are some important facts to know about tips and the ERTC:

• Taxable Tips: Only tips that are reported to the employer as taxable income can be included in qualified wages for the ERTC[1][3][5].
• Eligibility Criteria: To qualify for the ERTC, employers must have experienced a significant decline in gross receipts or a full or partial suspension of operations due to government orders related to COVID-19[2][3][4][5][6].
• Qualified Wages: The ERTC is based on qualified wages paid to employees during the eligible period. For employers with more than 500 full-time employees, qualified wages are limited to wages paid to employees who are not providing services due to a full or partial suspension of operations or a significant decline in gross receipts[1][3][5][6]. Tips that meet the eligibility criteria can be included in the calculation of qualified wages.
• IRS Clarification: Notice 2021-49 from the IRS clarified that tips are included as qualified wages eligible for the ERTC as long as they meet the eligibility criteria[5].

It's important to note that the ERTC has undergone updates and changes since its introduction. Employers should stay updated with the latest IRS guidance and consult with tax professionals to ensure compliance with eligibility requirements and maximize the benefits of the credit[1][4][5][6].

In conclusion, tips can be included in the calculation of qualified wages for the Employee Retention Tax Credit (ERTC) if they meet certain criteria. 

By understanding the eligibility requirements and staying informed about IRS guidelines, eligible employers can take advantage of this financial incentive to retain their employees during challenging economic times.