If your staff receive tip income, here’s what you need to know about your reporting requirements:
- Tips are taxable – Cash or not, tips are subject to federal income, and Social Security and Medicare taxes.
- Tips must be reported – Employees are responsible for reporting tips to their employer. Employers are responsible for reporting tip income to the IRS, and for withholding federal income, Social Security and Medicare taxes.
- Tips are easily recorded – The IRS offers form 1244, Employee’s Daily Record of Tips and Report to Employee, to help employees and employers record tip income.
Visit the IRS website if you want to learn more about requirements for reporting tip income.