Credit or Deduction for FICA on Tips: Who Decides?

An employer paying FICA on tips in excess of the old minimum wage can take a tax credit or a deduction for the FICA tax payment. Recently, there was a Tax Court case in which a restaurant operated through an S corporation. The corporation took a deduction for its payment of FICA on tips, but a shareholder claimed a tax credit on his return. The Tax Court said it’s up to the corporation, not the shareholder, to make the choice. A shareholder cannot unilaterally make the election.