Who Qualifies for
FICA Tax Credits
What are FICA Tax Credits?
In 2022, the IRS reaffirmed that businesses in the food, beverage, and hospitality industries may be eligible for a FICA Tip Credit — a tax credit that helps recover the employer’s share of Social Security and Medicare taxes paid on employee tips. If you operate a restaurant, bar, café, hotel, or similar business where tipping is customary, and you pay payroll tax on reported tips, you could qualify. Yet thousands of businesses have not taken advantage of this credit. Are you leaving money on the table?
Introduction to FICA Tax Credit Eligibility
The FICA Tip Credit allows eligible employers to claim a credit for a portion of the Social Security and Medicare taxes (FICA) they pay on employee-reported tips. This credit is designed for businesses where tipping is a regular part of employee compensation — such as restaurants, bars, cafes, and other food or beverage establishments.
To qualify, your business must:
Employ workers who regularly receive tips
Pay the employer’s share of FICA taxes on those reported tips
Serve food or beverages for on-premises consumption, where tipping is customary
This credit is claimed annually on IRS Form 8846 and can significantly reduce your business’s federal income tax liability.
Who Qualifies for FICA Tax Credit?
Key Eligibility Criteria for SETC Refund:
1
Businesses in Tipped Industries
If you own a business where employees receive tips and you pay payroll taxes on those tips, you may qualify for the FICA Tip Credit. This credit helps businesses recover a portion of the Social Security and Medicare taxes (FICA) paid on tip income reported by employees.
Common qualifying businesses include:
Restaurants
Bars
Casinos
Hotels
Coffee Shops
Catering Services
Resorts
Nightclubs
Any business where tipping is a regular part of employee compensation
2
Tip Income Requirements
To be eligible for the credit, the tips must meet the following criteria:
The tips were voluntarily received by employees from customers
The tips were reported to the employer
The combined wages and tips exceed the federal minimum wage
The employer paid their share of FICA taxes on the tip income
The FICA Tip Credit only applies to tip income above the minimum wage threshold, not on wages used to satisfy minimum wage obligations.
3
Employer Tax Responsibility
This credit is designed to benefit employers who:
Pay the employer portion of FICA taxes (Social Security and Medicare) on reported tips
Accurately report employee tips through payroll
Operate in an industry where tipping is customary and consistent
- Eligible employers can claim the credit annually using IRS Form 8846, reducing their overall federal income tax liability.
Important Note:
The FICA Tip Credit does not refund payroll taxes, but it does offset income tax owed by the business — leading to substantial savings over time. Refund amounts depend on total reported tips and tax liability.
At Blue Atlas,
We Make FICA Tip Credit Claims Easy for Your Business
If you run a restaurant, bar, or any business where employees earn tips, you may be entitled to thousands in tax credits through the FICA Tip Credit. Blue Atlas is your trusted partner in unlocking these savings by simplifying the claim process.
Let us help you claim back the money you’ve already paid in payroll taxes.
✅ Get a free estimate — see how much you could save
✅ No complicated paperwork — we handle the filing
✅ Takes just a few minutes to get started
Choose Blue Atlas — we make the FICA Tip Credit process fast, simple, and accurate.