For restaurant, bar, and salon owners with tipped staff
You pay tax on your staff's tips. Most of it can come back to you.
Every dollar of tips your employees report costs you 7.65% in Social Security and Medicare. A federal credit, Section 45B of the tax code, returns most of that, and the years still open can be amended. Many owners have never claimed it.
- Free estimate from the payroll reports you already have
- We prepare the credit and the amended returns. Your CPA can review every page
- Our fee is 20% of what comes back, and you pay it only when the IRS pays you
This is a real credit written into the tax code since 1993 and claimed on IRS Form 8846. It is not a loan, a grant, or a pandemic program.
Who it is for
Owners whose staff report tips through payroll.
How the credit works
The law already gives this money back. Someone just has to file for it.
When a server, bartender, or stylist reports tips, those tips count as wages. You pay the employer half of Social Security and Medicare on them, 7.65%, the same as on their paycheck.
Congress decided in 1993 that owners should not carry that cost on money that never passed through their register as revenue. So Section 45B gives you a dollar-for-dollar credit against your federal income tax for that 7.65%, on every reported tip dollar above what it takes to bring an employee to $5.15 an hour.
If you already pay your tipped staff $5.15 an hour or more in cash wages, as nearly every state now requires, almost every reported tip counts.
It is claimed on Form 8846. Plenty of CPAs file it every year. Plenty never mention it. If yours has not, the years that are still open can be amended, and unused credit can carry forward for up to 20 years.
| Tips staff reported through payroll | $400,000 |
| Employer FICA you paid on those tips (7.65%) | $30,600 |
| Tips used to reach $5.15/hr (cash wage already above it) | $0 |
| Credit for that year | $30,600 |
Rough estimate
What could be sitting in your old returns?
A rough estimate from the Section 45B formula only. The credit reduces federal income tax, so how and when it reaches you depends on your entity type, profits, and prior filings. Nothing here is a guarantee or tax advice.
What happens after you reach out
Three steps, and most of the work is ours.
A 15 minute call
We ask for your payroll summaries and the returns for the open years. From those we tell you what the credit is worth and whether it was ever claimed.
Same weekWe prepare the filing
Form 8846 for each year, plus the amended business return it flows into. Your CPA is welcome to review all of it before anything is sent.
A few weeksThe IRS processes it
Amended returns are slow. Plan on several months, sometimes longer. If the IRS writes back with questions, we answer them. When the refund arrives, you pay our 20%. Not before.
You pay at the endWho this is for
A good fit, and not a fit
Likely a fit
- Restaurants, bars, cafes, breweries, and caterers where customers tip
- Hair salons, barbershops, nail salons, and spas, for 2025 onward, under the 2025 tax law
- Your employees report their tips and you pay FICA on them through payroll
- Roughly $150,000 or more in reported tips a year, or several locations
- The credit was never claimed, or only for some years
Probably not a fit
- Tips are not run through payroll, or staff are paid as contractors
- Your CPA already files Form 8846 every year
- Automatic service charges only. The IRS treats those as wages, not tips
- A very small tip volume, where our minimum fee would not make sense for you
The fee, in plain terms
You pay when the IRS pays you. Not before.
for the estimate, the call, or the review of your old returns.
of the credit recovered, invoiced when the refund lands. Some national firms charge 25%. A minimum fee applies, which is why small tip volumes are not a fit.
stays with you, along with any credit carried forward to lower future tax bills.
Who you are dealing with
Tip Credit Claims is a program of Business GPS.
Business GPS LLC is a business consulting firm with offices in Washington DC and Los Angeles. It works on a success-based fee, so most of what the firm earns is paid at the end, when the client has the result in hand.
The credit is simple on paper and tedious in practice. The payroll company holds the tip figures, the CPA holds the returns, and the claim only works when the two are lined up year by year. That lining up is the work we do.
What we take off your plate
- The documentsWe tell you which payroll reports and returns to pull, then organize them and run the calculation for each year.
- The filingWe prepare the paperwork and check that everything the IRS requires is in it before it goes out.
- The follow-upWe stay on the correspondence with the IRS through the whole process, including responding to its requests.
Questions owners ask
Before you call
Is this legal? It sounds too good.
Yes. The FICA tip credit is Section 45B of the Internal Revenue Code, in place since 1993, and the IRS publishes the form for it, Form 8846. Amending a return to claim a credit you were entitled to is an ordinary filing. It is not the Employee Retention Credit and it has nothing to do with pandemic programs.
My CPA never mentioned it. Wouldn't they have claimed it?
Many do. Many do not, usually because tip reporting sits with the payroll company while the return sits with the CPA, and nobody connects the two. We check whether Form 8846 is already in your filed returns before we do anything, and if it is, we tell you there is nothing to recover.
Does this cost my employees anything?
No. The credit is for the employer's share of FICA. Your staff's own Social Security, Medicare, and benefits are untouched. Nothing about their pay or their tips changes.
How much will I get back?
It depends on how much your staff reported, what you paid them per hour, and which years are still open. The calculator above gives a rough idea. On the call we work it out from your actual payroll reports, and that number is the one we file.
How long until I see the money?
Honestly, a while. Amended returns go to the back of the IRS line, and it is common to wait many months, sometimes more than a year. That is part of why you pay nothing until it arrives.
We are an S corporation (or LLC, or partnership). Does that matter?
It changes where the credit lands. For pass-through businesses it flows to the owners' personal returns and reduces their tax there. We look at your structure and tell you how it would reach you before you commit to anything.
What if the business did not owe income tax in those years?
The credit offsets income tax, so a year with no tax may not produce a refund directly. Unused credit can generally be carried back one year and forward up to 20 years. We will tell you plainly if your situation makes this not worth doing.
I run a salon. Does this apply to me?
Starting with 2025 tax years, the 2025 tax law extended the credit to beauty services such as barbering, hair care, nail care, and esthetics, where tipping is customary. Because it starts in 2025, there is less to look back on than for a restaurant, but the 2025 return and every year after it count.
Will this get me audited?
Any return can be reviewed. This credit is calculated from your own payroll records, which the IRS already has from your Forms 941 and W-2. We document every figure so it can be supported if anyone asks.
Who is Tip Credit Claims?
Tip Credit Claims is a program of Business GPS LLC, a business consulting firm with offices in Washington DC and Los Angeles that works on a success-based fee: most of what we earn is paid at the end, when the client gets the result. Call us at 1-800-851-2477 or email info@businessgpsllc.com.
Find out what your tips have been costing you.
The estimate is free, it takes a short call, and you pay nothing unless money comes back.