10-035 Code Vt. R. 10-060-035-X - WITHHOLDING OF VERMONT INCOME TAX ON TIPS

Section 58412 WITHHOLDING OF VERMONT INCOME TAX ON TIPS

Under both Federal law (Internal Revenue Code § 3401(f) and Vermont law, ( 32 V.S.A. § 5841) , employers must withhold income taxes from substantially all types of remuneration paid to employees.

Supplementary remuneration, including cash tips and "gratuities" or "service charges" added to a patron's bill and distributed by the employer to the employees, constitutes "wages" subject to Vermont withholding.

In addition the employee is required to report to the employer by the 10th of the following month the amount of all other tips and supplementing remuneration received, if the total exceeds $ 20.00. The employer is responsible for Vermont withholding on the amount reported to him by the employee.

The Federal Internal Revenue Service has issued a pocket-sized booklet containing forms which are convenient for the employee to use in keeping a daily record of tips. (Form 4070A), and for reporting to the employer. (Form 4070). These forms provide all the information required for Vermont withholding liability.

Federal law provides that where tax has been previously withheld from regular wages, and supplemental wages or tips are paid at a later date, the employer may withhold at a flat 14% rate from the supplemental wages without allowances for exemptions and without reference to regular wage payments.

In the interest of simplification, employers may compute the Vermont withholding on the same supplementary wages, when received, at 3 1/2%of such wages or 25% of the amount of Federal tax withheld, whichever is more convenient. The employer includes this tax withheld from the supplementary remuneration in his next quarterly or monthly report to the Vermont Department of Taxes. Statutory Authority: 32 V.S.A. § 5841

Notes

10-035 Code Vt. R. 10-060-035-X

Adopted, April 20, 1967
Effective Date: May 1967

Statutory Authority: 32 V.S.A. § 5841