How to Report Taxable Tip Income
If you work in an occupation where tips are part of your total compensation, you have to do a certain amount of record keeping to accurately account for your tip income. Tips can be received in various ways, including directly from the customer, tips that are put on charge cards and paid to you by your employer, and tips you get under a tip sharing arrangement with other employees. Read on to learn how to report taxable tip income.
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Instructions
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Keep a record of the tips you receive on a daily basis and report the tips to your employer so that they can be taken into account for employment tax purposes. Use Form 4070A Employee's Daily Record of Tips on the Internal Revenue Service (IRS) website.
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Download Form 4070 Employee's Report of Tips to Employer from the IRS website or get Pub 1244 which has a one-year supply of those forms. Use this form to report tips on your daily record to your employer who adds them to tips from credit card charges.
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Include in tip income the value of non-cash tips received such as sporting event tickets, theater passes and other tangible items of value. You do not have to report the value of these non-cash items to your employer for Social Security and Medicare tax purposes.
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Give your tip record to your employer each month by the tenth day of the following month. If your regular wages are not sufficient to cover the withholding taxes for both your wages and tips combined, you can give your employer money to make up the difference.
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Report your tip income with your wages on Line 7 of Form 1040 or 1040A, or on Line 1 of Form 1040EZ. Your Form W-2 will include tips reported to your employer; however, if non-cash items were not included they must be added to your Form W-2 amounts.
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