Restaurant payroll in Texas is more complex than payroll in most industries. Tipped wages, overtime calculations for hourly staff, tip pooling rules, and TWC reporting all require careful handling. This guide covers what Allen restaurant owners need to know in 2026.
Tipped Wages and Tip Credits in Texas
Texas follows federal rules on tipped wages. Employers may pay tipped employees a base wage of $2.13 per hour as long as tips bring the employee’s total hourly earnings up to the federal minimum wage of $7.25. If tips fall short in any workweek, the employer must make up the difference. Employees must consistently receive more than $30 per month in tips to qualify for the tip credit rate. Accurate tip reporting is not optional — all tips must be reported and included in payroll records.
Calculating Overtime for Tipped Employees Correctly
Overtime for tipped employees is calculated on the full minimum wage, not the $2.13 base wage. The overtime rate equals 1.5 times the regular rate of pay, which is calculated by dividing total earnings (base wages plus tips) by total hours worked. A tipped employee who works 50 hours in a week and earns $300 in tips has a regular rate of approximately $8.13 per hour and an overtime rate of $12.20 per hour on the 10 overtime hours.
Tip Pooling Rules for Allen Restaurants
Tip pooling — sharing tips among front-of-house staff — is permitted but regulated. Only employees who customarily receive tips may participate. Managers, supervisors, and business owners may not receive any portion of a tip pool. All participating employees must be notified of the arrangement in writing. Employers cannot retain any portion of the tip pool under any circumstances.
Payroll Tax Obligations for Allen Restaurants
Restaurants withhold federal income tax, Social Security at 6.2% each, and Medicare at 1.45% each from tipped and non-tipped employees alike. Employers pay the matching employer portion of Social Security and Medicare. Federal unemployment tax (FUTA) applies to the first $7,000 of each employee’s wages. Texas SUTA applies to the first $9,000. Tip income reported by employees is included in their wages for FICA calculation purposes.
Recordkeeping Requirements for Restaurant Payroll
- Maintain records of all hours worked, including split shifts and overtime
- Track tip reports submitted by employees each pay period
- Keep FICA calculations on tip income separate and documented
- Retain all payroll records for at least four years per TWC requirements
- Document tip pool distributions and all employee acknowledgments
How Tax by Lonestar Helps Allen Restaurants With Payroll
Tax by Lonestar handles restaurant payroll across Allen, Fairview, and Collin County. We manage tipped wage calculations, overtime for hourly staff, FICA on tip income, TWC quarterly filings, and year-end W-2 preparation. If your restaurant is currently processing payroll manually or using software without local support, contact us for a free consultation and we will show you exactly what outsourcing costs and what it saves.
Frequently Asked Questions About Restaurant Payroll in Texas
What is the minimum wage for tipped employees in Texas in 2026? The base wage is $2.13 per hour, the same as the federal rate. Does tip income count toward Social Security and Medicare? Yes — all tip income is included in FICA wages. Can I require employees to participate in a tip pool? Yes, but only employees who customarily receive tips may participate and you cannot take any portion. What records do I need for a restaurant payroll audit? Employee time records, tip reports, payroll calculations, FICA records, and TWC quarterly filings for the prior four years.
