Working in the service industry often means part of your income comes in the form of tips. Keeping records of your tips is a necessary part of reporting this income for tax purposes, but do you have a good system in place to do this?
Proper tip reporting has three components:
- Keeping a daily record.
- Reporting tips to your employer.
- Reporting your tips on your tax return.
Recording daily activity – Per the IRS you can either keep a daily log or save the documents that show your tips. You can also use form 4070A to document your tips.
Reporting tips – You should provide a monthly summary to your employer by the 10th of the following month.
Keeping track of tip income can be made manageable by a good reporting system. Please contact the office if we can help.
Written by: Doug Rodrigues