How to Claim Tip Income on Tax Returns

How to Claim Tip Income on Tax Returns
••• tipping the jar image by easaab from Fotolia.com

As an employee earning tips as part of your job, you must pay taxes on this income. The Internal Revenue Service (IRS) requires employees earning tips to report their tip income to their employer in the form of a monthly report (Form 4070). The IRS also provides a daily tip record (Form 4070A) that can help a tipped employee keep track of tips earned each day during a monthly period, thus helping tipped employees report monthly tips. You must also claim tip income on tax returns for withholding purposes.

Use IRS Form 4070A to keep track of your daily tips throughout each month of the calendar year. You can then use this form to report your tips each month to your employer, to include your tip income on your tax return and as proof of your tips, if necessary.

Add up each monthly tip total for the calendar year to find your annual tip income.

Add your unreported annual tip income to your other earned wages. Place this wage total on line 1 (Form 1040EZ) or on line 7 (Form 1040).

Tips

  • After reporting tips to your employer throughout a calendar year, your employer incorporates these tips into your annual wages and you receive documentation of these wages in Form W-2 in box 1. You should only add additional tips to the figure in box 1 if you had additional tips you did not already report to an employer.

    Do not report monthly tips to an employer if the tips equal less than $20.