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The Small Business and Work Opportunity Tax Act of 2007 (2007 Small Business Act) included a few provisions that will be beneficial for employers who operate food and beverage establishments, and can claim the employer tip credit.


The employer tip credit was previously calculated based on the amount of tip income above the Federal minimum wage rate. With the increase of the Federal minimum wage rate, the 2007 Small Business Act allows employers to retain the benefit of the full tip credit. So, even though the Federal minimum wage rates have increased, the employer tip credit is now calculated on tip income above $5.15 an hour.


Another provision of the 2007 Small Business Act is that the employer tip credit is not limited for those businesses that may fall into the alternative minimum tax (AMT). Therefore, AMT status does not affect the benefit of the employer tip credit.


Please contact your Rea associate with any questions about the 2007 Small Business Act or the employer tip credit.


-By Susan Neuenschwander, CPA (Senior accountant, Wooster office)


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