The Internal Revenue Service has issued new guidance (Rev. Rul. 2012-18) that provides answers to a number of questions about how taxes are imposed on employee tips under the Federal Insurance contributions Act (FICA). The document begins with a detailed explanation of both an employer’s and employee’s FICA tax obligations as they apply to tips, clarifies how tips are to be reported to the employer and to the agency, and discusses the consequences for unreported amounts. The guidance also differentiates between what constitutes a tip and a service charge for tax purposes, explains when the section 45B employer tip credit should be applied, and sets forth a series of Q&As for employees and employers. The document is designed to modify and supersede prior guidance (Rev. Rul. 95-7) issued on this topic. To learn more about the guidance and its potential implications for employers, please continue reading at Littler's Washington D.C. Employment Law Update.