You must report tips to your employer so that:
- Your employer can withhold federal income tax and social security and Medicare taxes or railroad retirement tax,
- Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and
- You can avoid the penalty for not reporting tips to your employer (explained later).
Report to your employer only cash, check, debit, or credit card tips you receive.
If your total tips for any one month from any one job are less than $20, do not report the tips for that month to that employer.
If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Do not report to your employer any portion of the tips you receive that you pass on to other employees.
Do not report the value of any noncash tips, such as tickets or passes, to your employer. You do not pay social security and Medicare taxes or railroad retirement tax on these tips. taxmap/pubs/p531-001.htm#en_us_publink100022528
If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. Fill in the information asked for on the form, sign and date the form, and give it to your employer. A sample filled-in Form 4070 is shown on this page. To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244.
If you do not use Form 4070, give your employer a statement with the following information.
- Your name, address, and social security number.
- Your employer's name, address, and business name (if it is different from your employer's name).
- The month (or the dates of any shorter period) in which you received tips.
- The total tips required to be reported for that period.
You must sign and date the statement. You should keep a copy with your personal records.
Your employer may require you to report your tips more than once a month. However, the statement cannot cover a period of more than one calendar month. taxmap/pubs/p531-001.htm#en_us_publink100022529
Your employer can have you furnish your tip statements electronically. taxmap/pubs/p531-001.htm#en_us_publink100022530
Give your report for each month to your employer by the 10th of the next month. If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. taxmap/pubs/p531-001.htm#en_us_publink100022531
You must report your tips received in September 2010 by October 12, 2010. October 10th is on a Sunday, the 11th is a legal holiday, and the 12th is the next day that is not a Saturday, Sunday, or legal holiday.taxmap/pubs/p531-001.htm#en_us_publink100022532
You must report your tips received in October 2010 by November 10, 2010.taxmap/pubs/p531-001.htm#en_us_publink100022533
If your employment ends during the month, you can report your tips when your employment ends. taxmap/pubs/p531-001.htm#en_us_publink100022534
If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security and Medicare taxes or railroad retirement tax you owe on the unreported tips. (For information about these taxes, see Reporting social security and Medicare taxes on tips not reported to your employer
under Reporting Tips on Your Tax Return
, later.) The penalty amount is in addition to the taxes you owe.
You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. To do so, attach a statement to your return explaining why you did not report them. taxmap/pubs/p531-001.htm#en_us_publink100022535
Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes.
If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order.
- All taxes on your regular pay.
- Social security and Medicare taxes or railroad retirement tax on your reported tips.
- Federal, state, and local income taxes on your reported tips.
Any taxes that remain unpaid can be collected by your employer from your next paycheck. If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. See Publication 505, Tax Withholding and Estimated Tax, for more information.
You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2009. See Reporting uncollected social security and Medicare taxes on tips
under Reporting Tips on Your Tax Return, later. These uncollected taxes will be shown in box 12 of your 2009 Form W-2 (codes A and B).
Your employer may participate in the Tip Rate Determination and Education Program. The program was developed to help employees and employers understand and meet their tip reporting responsibilities.
There are two agreements under the program: the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). In addition, employers in the food and beverage industry may be able to get approval of an employer-designed EmTRAC program. For information on the EmTRAC program, see Notice 2001-1, which is on page 261 of Internal Revenue Bulletin 2001-2 at www.irs.gov/pub/irs-irbs/irb01-02.pdf
If you are employed in the gaming industry, your employer may have a Gaming Industry Tip Compliance Agreement Program. See Revenue Procedure 2007-32, 2007-22 I.R.B. 1322, available at www.irs.gov/irb/2007-22_IRB/ar13.html
If you are employed in the food and beverage industry, your employer may participate in an Attributed Tip Income Program (ATIP). See Revenue Procedure 2006-30, 2006-31 I.R.B. 110 available at www.irs.gov/irb/2006-31_IRB/ar11.html
Your employer can provide you with a copy of any applicable agreement. To find out more about these agreements, visit www.irs.gov
and type "restaurant tip reporting" in the Keyword
search box. You may also call 1-800-829-4933 or visit www.irs.gov/localcontacts
for the IRS Taxpayer Assistance Center in your area; or send an email toTip.Program@irs.gov
and request information on this program.