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Tip Income Reporting Policy

It is important to keep good record of tip income. Below is the tip income reporting policy advised by the IRS for tax filing purposes including how to report tip income to the employer.

Are tip income received from customers taxable?

All tips received from customers are taxable, not just tips received from the employer. All tip income must be reported on Form 1040. In some cases, an employer may be required to assign or allocate tips to an employee. If accurate records have not been kept, the allocated tips must be reported on the Form 1040.

Record of tip income

You must keep a record of all tips you receive so you can:

  1. report tips to your employer as required
  2. report your tips accurately on your tax return
  3. prove your tip income if your tax return is ever questioned or audited by the IRS
Where and how to record tip income?

 

Tip Income Reporting Policy

You can use the IRS tax from 4070A Employee's Daily Record of Tips to record your tip income. The Daily record of tips tax form can be found in the IRS Publication 1244 called Employee's Record of Tips and Report to Employer.

You should include the value of all noncash tips such as tickets or passes.



When to file the tax form 4070A?

The tax form 4070A, Employee's Daily Record of Tips to Employer is due by the 10th day of the month following the month you are reporting by the IRS rules. However, each employer may impose a different due date for the form. For example, if you are reporting your tip income to your employer for January, then the Form 4070A is due on February 10th for January tip income. Depending on the employer, some employer ask that you report your tips at the end of your daily shift.

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