Posted on May 15, 2021 by Heather Adams

Here’s what taxpayers need to know about reporting tip income on their tax return

Here’s what taxpayers need to know about reporting tip income on their tax return

Generally, income received from any source, including tips, is taxable. Here’s some information to help taxpayers report tip income.

All tips that taxpayers receive are income and subject to federal income tax. Taxpayers must include all tips they receive in their gross income. This includes:

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 correctly report their tip income.

Use the Interactive Tax Assistant
This 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.

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.

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