How to Claim Tips on Income Tax

All tips must be reported to the IRS.

All tips must be reported to the IRS.

When you work in the service industry, nothing feels better than the feeling of cold, hard cash in your hand when a customer tips you. But, as good as it feels to earn tips, you shouldn't count them before the Internal Revenue Service takes its share. Tips must be documented on a daily basis, submitted in monthly reports to your employer, and included in your annual tax returns.

Fill in IRS Form 4070A each day you get tips. This must show how much you earned and if you gave any tip money to other staff members. You do not need to submit form 4070A, but you should keep it for your own records.

Complete IRS Form 4070 on a monthly basis, using the information you entered onto Form 4070a, and give it to your employer. The form is due on the 10th day of the month following the month you got the tips. For example, the report for your May tips is due June 10.

Report the total tips on line 7 of Form 1040 or 1040 a, or on line 1 of form 1040EZ.

Tip

  • If you earn less than $20 in tips in a month, you don't need to report it to your employer. You do, however, need to report it in your annual tax return.
 

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