What to Know About Declaring Your Tip Income

8 - stylizedIRS Tax Tip #8 from Carpenter, Evert and Associates – Declaring Your Income from Tips

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If you receive tips at your job, you probably know that the income from tips is taxable. But did you know those concert tickets your favorite customer gave you are also taxable? Or that you are required to report your income from tips to your employer in most cases?  This IRS tip on tips will get you headed in the right direction.

Important Reminders about Tip Income – If you get tips on the job from customers, the IRS has a few important reminders:

  • Tips are taxable. You must pay federal income tax on any tip income you receive. The value of non-Change jar - with paper moneycash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tip income 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 tip income 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 income from tips. Do not report the value of any noncash tips to your employer.
  • Keep a daily log of tips.  Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

For more information, see Publication 531, Reporting Income from Tips, on the IRS website. Or call 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Carpenter, Evert and Associates Top Ten Tax Tips for 2014:

  1. How to Choose Professional Tax Services
  2. Are you Eligible for the Earned Income Tax Credit?
  3. Tax Return Information is Now at Your Fingertips  
  4. Don’t Miss Out on Important Tax Credits
  5. Tax Benefits for Parents
  6. How Will the Affordable Care Act Affect Your Taxes?
  7. Do you Know Your Tax Filing Status?
  8. What to Know About Declaring your Tips 
  9. Taxable and Nontaxable Income – What’s the Difference? 
  10. Tax Deductions for Charitable Contributions

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