Caddies are typically independent contractors, although some are classified as employees. Golf clubs and resorts usually pay caddies what is known as a caddy fee for each round they work, but a large portion of their income comes from tips. Caddy fees and tips paid by the golfer directly to the caddy must be reported as income, regardless of whether the caddy is an employee or independent contractor. As far as the Internal Revenue Service is concerned, tips are income and must be reported accordingly.
Whether you're an independent contractor or an employee, you will need to report the fees and tips you receive as a caddy as income.
Claiming Taxes On Your Income
If you are caddy and an independent contractor, any money or tips that could be considered caddy wages which you earn from working at the golf club are taxed as self-employment income. Unlike employees who have taxes withheld from their paychecks, self-employed contractors are responsible for paying their own employment taxes and use IRS Schedule SE to figure taxable self-employment income. Close to tax time, you’ll receive a Form 1099-MISC documenting any caddy fee you received from the club if you were paid more than $600 for the year. When you earn less than this amount, you may not receive a 1099-MISC from a client, but you are still responsible for reporting the income to the IRS and paying taxes on it.
Keeping meticulous records makes everything much easier during tax season. At a glance, you can determine how much you’ve received in income, including tips, from all the jobs you had for the year. This way, if you don’t receive a 1099-MISC, you still have an idea of how much income to report. The more accurate your record keeping, the more prepared you are if the IRS takes a second, closer look at your return.
Because you are not having payroll taxes withheld from your paycheck as employees do, you are responsible for paying your Self-Employment Contributions Act tax yourself. This tax is the self-employed version of mandatory FICA payroll taxes that employees pay. SECA taxes are 15.3 percent of your earnings and cover your contribution to Social Security and Medicare, but you can write off half of this 15.3 percent SECA tax when you file your return.
Learning About Payroll Tax Deductions
If you are an employee, you receive a paycheck, and the golf club deducts appropriate payroll taxes from your caddy wages. At the end of the year, you receive a W-2 form with all the taxes that were withheld, as well as an accounting of your total wages and income for the year. Employees have to report all tips in excess of $20 for the month to their employer. To keep track of tips, use IRS Publication 1244, Employee's Daily Record of Tips and Report to Employer.
Filing Your IRS Forms
The tips are included on your W-2 form if you reported them to your employer. If you don’t report all of your tips each pay period for some reason or you do not earn $20 in tips for a particular month, you still have to claim the unreported amounts when you file your tax return using IRS Form 4137, Social Security and Medicare Tax on Unreported Tip Income.
- IRS: Independent Contractor (Self-Employed) or Employee?
- IRS: Publication 17 (2017), Your Federal Income Tax
- IRS: Tip Recordkeeping & Reporting
- IRS: Topic 761 – Tips – Withholding and Reporting
- IRS: Self-Employment Tax (Social Security and Medicare Taxes)
- IRS: Self-Employed Individuals Tax Center
- IRS: Publication 1244 Employee’s Daily Record of Tips and Report to Employer
Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.