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Show Cash tips now taxed more. Employers withhold income tax and Social Security tax (or railroad rail-road retirement tax) from the combined com-bined tips and wages, up to the Social So-cial Security wage base. Form 941 , "Employers Quarterly Quarter-ly Federal Tax Return," is used to pay the taxes collected to IRS. Beginning in 1988, employers with tipped employees must pay FICA (Social Security) tax on the total amount of cash tips reported. The Internal Revenue Service announced that under a new provision provi-sion of the law, all cash tips subject to employee FICA tax are considered consi-dered wages, making these tips subject to employer's FICA. Pre-'88 law stated employers were not required to pay FICA tax on tips, unless they paid wages that were less than the federal minimum wage and wages paid were taxed. The IRS stated the new law eliminates elimin-ates the benefit an employer with tipped employees would have over an employer whose employees receive re-ceive all their compensation as salaries or wages. Employees report to employers each month cash tips of $20 or |