Here's another helpful post from our friends at Savvy Sugar. Check it out:
If you're in the service industry, a big chunk of your income may come from tips. But don't think you can get away with not filing taxes for them. Here are a couple of tips from the IRS:
- Tips are taxed. Your tips will face federal income, Social Security and Medicare taxes. You will also be taxed on non-monetary tips like tickets, and gifts will be counted as income.
- Include them on your tax return. Include your cash tips, tips added to credit card bills, and tips you split with co-workers when reporting gross income on your tax return. Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; Form 1040EZ, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3.
- Report to your employer. If you earn more than $20 in tips, you need to report this income to your boss. Your employer is required to withhold federal income, Social Security and Medicare taxes. You don't have to report non-monetary tips to your boss. If you don't report these tips to your employer, you will face a penalty.
To read the rest of what you need to know about tips and taxes, head over to Savvy Sugar.