Do you know that all employees who receive tips have to report their tips to the IRS. Tips are also considered to be income. If in any month you receive more than $20 in tips from customers, tips added to credit cards, and any tips you receive under a tip splitting arrangement, you must report your tips to your employer so your employer can withhold the proper federal income tax, social security tax, and Medicare tax. Let me clarify something here. If you make over $20 in tips, you must report it to your employer, however all tips must be reported to the IRS.
You must keep a daily log of all tips received. You employer is automatically going to allot tips received to all employees based on their income received. If you turn in your figures for tips received, your employer will withhold the taxes and it will be reported on your W2. When it's time to file your taxes, you will report your figures (in gross income) and not your employer's tip figures.
Keeping a daily log is important. This shows due diligence in the event of an audit.
Contact me for clarification on this topic or to ask any tax questions.
Now is the time to start your daily log for tax year 2011, if you haven't already.
Always accurate and affordable tax preparation.
Wanda E Green
818.934.1580
Friday, January 21, 2011
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