Taxpayers must report tip money as income on their tax return

Issue Number: Tax Tip 2022-23


Taxpayers must report tip money as income on their tax return

For those working in the service industry, tips are often a vital part of their income. Like most forms of income, tips are taxable. Therefore, it’s also vital that people understand the tax obligations that come with tip income. Here’s some information to help taxpayers report tip income so they don’t receive a surprise tax bill.

Taxpayers must include all tips they receive in their gross income. This includes:

  • Tips directly from customers.
  • Tips added using credit, debit or gift cards.
  • Tips from a tip-splitting arrangement with other employees.

The value of non-cash tips, such as tickets, passes or other items of value is also income and subject to tax.

Three things can help taxpayers to correctly report their tip income.

  • Keep a daily tip record.
  • Report tips to their employer.
  • Report all tips on their income tax return.

Use the Interactive Tax Assistant
This online tool provides answers to tax law questions. Taxpayers can use the Interactive Tax Assistant on IRS.gov to find out if their tip income is taxable.

What employers need to know
If an employee receives $20 or more in any month, they must report their tips for that month to their employer by the 10th day of the next month. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.

More information:
Is My Tip Income Taxable?
Form 4137, Social Security and Medicare Tax on Unreported Tip Income
Publication 1244, Employee’s Daily Record of Tips and Report to Employer
Tip Recordkeeping & Reporting
Publication 531, Reporting Tip Income

Share this tip on social media — #IRSTaxTip: Taxpayers must report tip money as income on their tax return. https://go.usa.gov/xtdsh

Back to Top

FaceBook Logo
YouTube Logo
Twitter Logo
LinkedIn Logo

Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s