This chapter is for employees who receive tips from customers. If you are self-employed and receive tip income, see Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) , for more information.
All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly from customers, tips from charge customers that are paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement.
The value of noncash tips, such as tickets, passes, or other items of value are also income and subject to tax.
Reporting your tip income correctly is not difficult. You must do three things.
- Keep a daily tip record.
- Report tips to your employer.
- Report all your tips on your income tax return.
This chapter will show you how to do these three things, and what to do on your tax return if you have not done the first two. This chapter will also show you how to treat allocated tips.
Publication
- 531 - Reporting Tip Income
- 1244 - Employee’s Daily Record of Tips and Report to Employer
Form (and Instructions)
- 4137 - Social Security and Medicare Tax on Unreported Tip Income
- 4070 - Employee’s Report of Tips to Employer
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