Do you work at a hair salon, barber shop, casino, golf course, hotel
or restaurant or drive a taxicab? The tip income you receive as an
employee from those and other services is taxable income.
Here are some tips about tips:
- Tips are taxable. Tips are subject to federal
income, Social Security and Medicare taxes, and may be subject to state
income tax as well. The value of non–cash tips, such as tickets,
passes or other items of value, is also income and subject to tax.
- Include tips on your tax return. You must include
in gross income all cash tips you receive directly from customers, tips
added to credit cards, and your share of any tips you receive under a
tip–splitting arrangement with fellow employees.
- Report tips to your employer. If you receive $20
or more in tips in any one month, you should report all your tips to
your employer. Your employer is required to withhold federal income,
Social Security and Medicare taxes.
- Keep a running daily log of your tip income. You
can use IRS Publication 1244, Employee's Daily Record of Tips and
Report to Employer, to record your tip income. For a free copy of
Publication 1244, call the IRS toll free at 800-TAX-FORM (800-829-3676).
For more information, check out IRS Publication 531, Reporting Tip
Income, or Publication 3148, Tips on Tips. They are available by
calling 800-TAX-FORM (800-829-3676) or by going to the IRS Web site at
IRS.gov.
Remember that for the genuine IRS Web site be sure to use
.gov. Don't be confused by internet sites that end in .com, .net,
.org or other designations instead of .gov. The address of the official
IRS governmental Web site is www.irs.gov.
