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Employees who receive tips of less than $20 in a calendar month aren't required to report their tips to you but must report these amounts as income on their tax returns and pay taxes, if any.
Employers subject to the Fair Labor Standards Act must pay the current Federal minimum wage of $7.25 per hour.
Tip Pooling An employee must be able to keep at least the full minimum wage.However, Minnesota does not allow required tip pooling. If employees voluntarily decide to share their tips, the employer may safeguard the shared tips and disburse them according to the employees' agreement.
If you're an employer with tipped employees, your employees' tips may constitute taxable wages for payroll tax purposes.If your employee does make more than $20 in tips per month, you are responsible to withhold income, Social Security, and Medicare taxes on reported tips.
Actual minimum wages for Minnesota, Minneapolis and St. Paul: The Minnesota minimum wage, $10 an hour for large employers in 2020, is adjusted annually for inflation.
In December 2019, officials announced that on January 1, 2020, the minimum wage in Minnesota will increase to $8.15 an hour for small employers and $10 an hour for large employers. Since the Minnesota state minimum wage is adjusted each year for inflation, it is possible that Minnesota raises the minimum wage in 2021.
When tips are received by the employee from the employer, such as banquet tips or service charges, the amount is considered regular wages and is fully subject to UI, ETT, SDI, and PIT withholdings.
An employee's cash tips are not taxable wages unless they amount to $20 or more in a calendar month, and the employee reports them to you by the 10th of the month following the month in which they were received. Once the $20 threshold has been reached, however, all cash tips are wages, including the initial $20.
Next year, half of U.S. states will raise their minimum wage, up from 21 in 2020. All but five of those states Connecticut, Florida, Nevada, Oregon and Virginia will hike their hourly minimum on Friday.