Tipped Employees - 2021 | Best Guide - CPA Clinics
All tips you receive are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement.
Reporting your tip income correctly is not difficult. You must do three things.
1) Keep a daily tip record.
2) Report tips to your employer.
3) Report all tips on your income tax return.
You must keep a daily tip record so you can:
There are two ways to keep a daily tip record. You can either write information about your tips in a tip diary, or keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips.
Tip diary. If you keep a tip diary, you can use Form 4070A, Tipped Employee’s Daily Record of Tips. The form is available at www.irs.gov.
