{1:50 minutes to read} If you receive tips or gratuities at work, there are some things you should know about that type of income as it relates to taxes. To help, here are a few “Tips.”
- All tips and gratuity income is taxable, whether in the form of cash or other items or gifts such as event tickets.
- Restaurant workers, the largest group of employees in our country earning tips, must also include any tip splitting agreements they have with other employees. One of the things that employers and employees should know is that there is a reporting requirement within the business entity. If a person receives $20 or more in tips in any one month, they must report this to their employer. This includes cash, check, credit cards, etc. However, it does not include any non-cash tips. Non-cash tips are includable as income on your return but not on your report to your employer.
- An employer is required to withhold Social Security, Medicare taxes, and Federal and State Income taxes on these reported tips.
A good rule of thumb for tipped employees is to keep a daily log. There is a form available in IRS Publication 1244 that can help employees with this.
For more information on this topic, please refer to IRS Publication 531, Reporting Tip Income.
If you have any questions, you can always contact your tax preparer or contact us, Steven J. Ganns CPA at 914-682-7007 or info@gannscpa.com.
Stephen J. Ganns, CPA
914-682-7007
steve@gannscpa.com
www.gannscpa.com
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