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IRS Can Assess Employers' FICA Liability Based on Employees' Aggregated, Estimated Unreported Tips

This report relates to 1 case(s)

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    U.S. v. Fior D’Italia, Inc., 122 S. Ct. 2117 (2002) (0 other reports)

Author: Alice Gilman

In US v. Fior D'Italia, Inc., +122 S. Ct. 2117 (2002), the Supreme Court addressed whether the Internal Revenue Service (IRS) can use an aggregate estimation method to assess an employer with additional FICA (Social Security and Medicare) taxes on unreported tips.

Employees who earn $20 or more a month in tips must report them to their employers by the 10th day of the following month. It is not unusual for employees to underreport their tips. Under Internal Revenue Code (I.R.C.) § 3121(q), tips received by an employee are subject to both the employee and employer portions of FICA. Under +I.R.C. § 6201, the IRS has authority to make tax assessments against any taxpayer for any tax. However, employers are not liable for FICA taxes on unreported tips until the IRS makes an assessment for those taxes.