Reporting  Tip  Income

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Introduction

This publication is for employees who receive tips.

All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips 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 dothree things.

1. Keep a daily tip record.
2. Report tips to your employer.
3. Report all your tips on your income tax return.

 
This publication will explain these three things and show you what to do on your tax return if you have not done the first two. This publication will also show you how to treat allocated tips.

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taxmap/pubs/p531-000.htm#TXMP2440b63b Keeping a Daily Tip Record(p2)

Income, Tip

taxmap/pubs/p531-000.htm#TXMP32765c1e Why keep a daily tip record?(p2)

You must keep a daily tip record so you can:

• Report your tips accurately to your employer,
• Report your tips accurately on your tax return, and
• Prove your tip income if your return is ever questioned.

taxmap/pubs/p531-000.htm#TXMP759519fd How to keep a daily tip record.(p2)

There are two ways to keep a daily tip record. You can either:

• Write information about your tips in a tip diary, or
• Keep copies of documents that show your tips, such as restaurant bills and credit card charge slips.

You should keep your daily tip record with your personal records. You must keep your records for as long as they are important for administration of the federal tax law. For information on how long to keep records, see Publication 552, Recordkeeping for Individuals.

If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. Publication 1244 includes a 1- year supply of Form 4070A. Each day, write in the information asked for on the form. A filled-in Form 4070A is shown on this page.