Tips about Tips
CPA in Houston
Generally, income received in the form of tips is taxable. Here’s some information to help taxpayers correctly report the income they receive as a tip:
- Use the Interactive Tax Assistant. The ITA tool is a tax-law resource that asks taxpayers a series of questions and provides a response based on the answers. Taxpayers can use Is My Tip Income Taxable?.
- Show All Tips on a Tax Return. Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report the amount of any unreported tip income to include as additional wages. This includes the value of non-cash things someone receives as a tip, such as tickets or passes to an event.
- Report All Types of Tips. Taxpayers must pay tax on all tips received during the year, including those:
- Directly from customers.
- Added to credit cards.
- From a tip-splitting agreement with other employees.
- Report Tips to an Employer. Employees who receive $20 or more in tips in any month must report their tips for that month to their employer by the 10th day of the next month, including cash, check and credit card tips received. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.
- Keep a Daily Log of Tips. Use Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record tips. This will help report the correct amount of tips on a tax return.
Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.
CPA in Houston.
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