If you receive tips on the job from customers, you must include those tips in the
computation of your tax liability, if any. 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. The method for paying out charge tips
is determined by the employer. Charge tips can be distributed daily or accumulated
and paid through regular payroll. The value of noncash tips, such as tickets, passes,
or other items of value, is also subject to income tax.
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, and debit and credit card tips you receive. Your employer is required to
withhold federal income, Social Security, and Medicare taxes on the reported tips.
You are not required to report the value of any noncash tips to your employer, but
they are taxable.
This publication is distributed with the understanding that the author, publisher and
distributor are not rendering legal, accounting or other professional advice or
opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2014