Tuesday, February 19, 2013

Important Info on tip income, especially if you are doing your own taxes


Be very sure to include your tip income if you receive tips on your job.  Being a waiter or waitress who earns minimum wage and show NO tip income year after year, is begging to be audited.  You could easily be selected as a random audit.  Include your tip income and eliminate the possibility of the IRS asking questions, or not.

If your pay from your job includes tips, the IRS has a few important reminders about tip income:
  • Tips are taxable. Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your return. You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
  • Keep a daily log of tips. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record your tips.
For more information, see IRS Publication 1244 or Publication 531, Reporting Tip Income. Both are available at IRS.gov or by calling 800-TAX-FORM
(800-829-3676).
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