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Classification of Wages for Lessons - CA California

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  • Classification of Wages for Lessons - CA California

    Hi, all.

    In our business, we have employees who in addition to their regular pay, get both gratuities (which I know is not included in calculating their rate of pay for over time) and a portion of pay for lessons that they teach. They are paid their hourly wages for any lesson that they are teaching but they also get a percentage of lesson fees. My instincts tell me that this should be included in their rate of pay but what would I classify these wages as? They're not really a bonus or a commission.

    Also, do I tax them at the normal rate or at the supplemental wage rate.

    Any help would be greatly appreciated!

  • #2
    Incentive? Shared fees? You can call them anything you like on the paystub; just set up a unique earnings code.

    I would tax them using the regular calculation.

    Why are the gratuities not included in the RRP calc?
    Pattymd
    Senior Member
    Last edited by Pattymd; 05-20-2009, 03:49 PM.
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      Gratuities are not included in the rrp in California.

      From the FAQ on the CA DIR website:

      "Q. Are the tips I receive considered part of my "regular rate of pay" for overtime calculations?

      A. No. Since tips are voluntarily left for you by the customer of the business and are not being provided by the employer, they are not considered as part of your regular rate of pay when calculating overtime."

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      • #4
        Just to be clear, CA rules affect CA taxes only (CA-SIT, CA-SDI, CA-SUTA). No state rules ever have any impact on federal taxes (FIT, FICA, FUTA).
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)

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        • #5
          I asked because sometimes employer use "gratituities" and "tips" noninterchangeably.
          I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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