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Tips and Taxes

Posted by Admin Posted on Feb 21 2019

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Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those services is taxable income, advises the IRS.

As taxable income, these tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.

You must keep a running daily log of all your tip income and tips paid out. This includes cash that you receive directly from customers, tips from credit card charges from customers that your employer pays you, the value of any non-cash tips such as tickets or passes that you receive, and the amount of tips you paid out to other employees through tip pools or tip splitting and the names of those employees.

You can use IRS Publication 1244, Employee's Daily Record of Tips and Report of Tips to Employer, to record your tip income. For a free copy of Publication 1244, call the IRS toll free at 1-800-TAX-FORM (1-800-829-3676).

If you receive $20 or more in tips in any one month, you should report all your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes and to report the correct amount of your earnings to the Social Security Administration (which will affect your benefits when you retire or if you become disabled, or your family's benefits if you die).  Contact us so your wages are properly reported!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

The information provided on the LBCPA Blog is a community service for general information purposes only, and should not be used as a substitute for consultation with professional advisors who specialize in the topics covered. Please refer to your advisors for specific advice on these subjects. The information is not intended to be used, and it cannot be used, for the purposes of avoiding U.S. Federal and/or State tax laws or the tax laws of any foreign jurisdiction.

These blogs contain general information only and Lord Breakspeare Callaghan LLC or any of the other companies or firms presenting information are not providing accounting, business, financial, investment, legal, tax, or other professional advice or services. Lord Breakspeare Callaghan LLC or any of the other companies or firms contributing with articles shall not be responsible for any loss sustained by any person who relies on this information.

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