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Bookkeeping Tips on Tips

Written by: Stephanie Horne

Article Overview: Are you a hairdresser, waiter or waitress? Do you work at a barber shop, golf course, hotel, casino or drive a taxicab? Did you know that the money you receive from those services is taxable income? Here are some tips about tips:

Bookkeeping Tips on Tips

1) Tips are taxable. The tips you receive are subject to federal income tax as well as Social Security and Medicare taxes. It may also be subject to state income tax as well. The value of non-cash tips, such as tickets, is income and is also subject to federal income tax.

2) Report tips to your employer. If you receive twenty dollars or more in tips in any given month then you should report the tips to your employer. Your employer in turn is required to withhold federal income, Social Security and Medicare taxes.

3) Keep a daily log of your tip income. You can use IRS Publication 1244, Employee's Daily Record of Tips to record your tip income.

4) Include tips on your tax return. You must include in income all cash tips you receive directly from customers, tips added to credit cards, and the share of any tips you receive under a tip-splitting arrangement with your fellow employees.

Please feel free to Contact me if you have any questions, or check out IRS Publication 531, Reporting Tip Income, or IRS Publication 3148, Tips on Tips for more information at www.irs.gov.

For more information please visit my Bookkeeping Tips page - I look forward to hearing from you!

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Article Tags: advice, bookkeeping tips, income, money



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