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IRS.gov Website
Publication 531
taxmap/pubs/p531-001.htm#en_us_publink100022525

Reporting Tips to Your Employer(p3)

rule
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Why report tips to your employer.(p3)

rule
You must report tips to your employer so that:
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What tips to report.(p3)

rule
Report to your employer only cash, check, and debit and credit card tips you receive.
If your total tips for any 1 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. However, you must report tips you receive from 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, Medicare, Additional Medicare, or railroad retirement taxes on these tips.
taxmap/pubs/p531-001.htm#en_us_publink100022528

How to report.(p4)

rule
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 above. 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. You must sign and date the statement. Be sure to keep a copy with your tax or other 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 1 calendar month.
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Electronic tip statement.(p4)
Your employer can have you furnish your tip statements electronically.
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When to report.(p4)

rule
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.
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Example.(p4)

You must report your tips received in September 2014 by October 10, 2014.
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Final report.(p4)
If your employment ends during the month, you can report your tips when your employment ends.
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Penalty for not reporting tips.(p4)

rule
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, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips. (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement 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

Giving your employer money for taxes.(p4)

rule
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.
  1. All taxes on your regular pay.
  2. Social security, Medicare, Additional Medicare, or railroad retirement taxes on your reported tips.
  3. 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.
EIC
Uncollected taxes. You must report on your tax return any social security and Medicare taxes, or railroad retirement taxes that remained uncollected at the end of 2013. These uncollected taxes will be shown on your 2013 Form W-2. See Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later.
taxmap/pubs/p531-001.htm#en_us_publink100022537

Tip Rate Determination and Education Program(p5)

rule
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). A variation of the TRAC program, the Employer Tip Reporting Alternative Commitment, (EmTRAC) was designed to allow employers in the food and beverage industry to design and receive approval for their own TRAC programs. 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 participate in the Gaming Industry Tip Compliance Agreement Program. See Revenue Procedure 2007-32, 2007-22 I.R.B. 1322, available at www.irs.gov/pub/irs-irbs/irb07_22.pdf.
Your employer can provide you with a copy of any applicable agreement. To find out more about these agreements, visit IRS.gov and enter "restaurant tip reporting" in the search box. You may also call 1-800-829-4933, visit www.irs.gov/localcontacts for the IRS Taxpayer Assistance Center in your area, or send an email to Tip.Program@irs.gov and request information on this program.