The Taxability of Tip Income
February 25, 2022
Like most income, tips in the service industry are taxable. It doesn’t matter if tips are paid directly in cash or added to payments by credit, debit or gift cards, or shared with coworkers. Noncash tips, such as tickets or passes are also taxable. To correctly report tip income, the IRS advises taxpayers to keep a daily tip record and report all tips to their employers and on their income tax returns. What if you’re the employer of tipped workers? Employees who receive $20 or more in any month must report the tips to you by the 10th of the next month. You must then withhold income and employment tax on the reported tips. For more about the taxability of tip income, click here or contact our tax team.
Posted February 25, 2022
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