Quote of the day

Loading Quotes...

Reporting Tips on your Tax Return

A few weeks back, a story made the news about a Pastor who received a bill at an Applebee’s that included an 18% tip as the Pastor was part of a group of 20 people. Keep in mind, unless you have been hiding under a rock for the last 50 years, it’s common to see menus state that for a party of usually 6 or more, the tip is automatically added to the bill.  Also note that the party of 20 asked for 20 separate bills, which I can only imagine is a waitress’s worst nightmare. The one customer of 20 refused the tip, crossed it off the receipt and wrote, “I give God 10%, why do you get 18?” The story takes an interesting turn after another waitress put the receipt on the internet.


It came to the Pastor’s attention, she complained to Applebee’s and the waitress that put the receipt out there was fired. The Pastor was quoted elsewhere as saying “The note was “a lapse in judgment that has been blown out of proportion,” adding that she left a smaller tip in cash on the table.
Smaller than the $6 that was on her bill? Hmmm.

That’s my (too) long introduction to today’s message. The IRS asked me to remind you that if your pay from your job includes tips, there are a few things you should be aware of:

  • Tips are taxable. Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your return. You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
  • Keep a daily log of tips. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

It can’t be easy waiting tables, so if that’s your job right now, I hope these customers are few and far between. I promise you, I won’t be one of them, I go out to dinner to relax, not to give anyone grief.

  • Chris February 22, 2013, 6:20 pm

    Although it can be tempting to not report some tips, it can be more important than one might think.

    I have read a story (just a story) where a waiter lost his job along with all his co-workers when his chain restaurant closed. The story teller has been reporting his tips, and when he collected unemployment his check was much larger than the unemployment benefits of his co-workers who had not been reporting.

Leave a Comment