Important – Tip Income

IRS has a few important reminders:

Tips are  definitely  taxable.

You must pay federal income tax on any and all tips you receive.

The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.

Include all tips on your return.

You must include the total of all tips you received during the year on your income tax return.

This includes tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.

Report tips to your employer.

If you receive $20 or more in tips in any one month, from any one job, you must report your tips for that month to your employer.

The report should only include cash, check, debit and credit card tips you receive.

Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips. Do not report the value of any non-cash tips to your employer.

Keep a daily log of tips.( this is the best idea of all )

Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.