Tip Income; How It Affects Your Taxes

To better serve our clients and friends, to keep you up-to-date and informed , here is IRS's Tax Tip on Tip Income; How It Affects Your Taxes

If you get income from tips, you should know some things about tips and taxes. Here are a few tips from the IRS to help you file and report your tip income correctly:

• Show all tips on your return. You must report tip income. This includes the value of non-cash tips such as tickets, passes or other items.
• All tips are taxable. You must pay tax on all tips you received during the year. This includes tips directly from customers and tips added to credit cards. This also includes your share of tips received from a tip-splitting agreement with other employees. 
• Report tips to your employer. If you receive $20 or more in any one month, you must report your tips for that month to your employer by the 10th day of the next month. Only include cash and check and credit card tips you received. Your employer must withhold federal income, Social Security and Medicare taxes on the reported tips. 
• Keep a daily log of tips. Use Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips. This will help you report the correct amount of tips on your tax return.

For more on this topic, see Publication 531, Reporting Tip Income. You can get it on IRS.gov.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

https://content.govdelivery.com/accounts/USIRS/bulletins/14098a1?reqfrom=share

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Art Bradley CPA & Janice Papais CPA 
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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