Can the 8%, normally used for allocated tips, be a matter agreed upon as reported tips between the employer and employees, so that the employees do not have to report the exact amount of their tips?
No. The law requires that the employee who receives tips must report the actual tip amount to his or her employer if the amount is $20 or more for that calendar month. The 8% figure is not a simplified reporting method. If an employee is customarily tipped between 10% and 20%, reporting only 8% of his or her sales would not only lead to underreporting of income, but also an underpayment of your of Social Security and Medicare taxes. The employee should keep a tip record of his or her daily tips. A daily tip record can relieve the employee from having to include allocated tips in his or her income by documenting that the amount of tips the employee reported were the actual amount received. For more information on tip reporting for employees, refer to Chapter 7 of Publication 17, Your Federal Income Tax (For Individuals), or Publication 531, Reporting Tip Income.
Related Questions
- Can the 8% - normally used for allocated tips - be a matter agreed upon as reported tips between the employer and employees, so that the employees do not have to report the exact amount of their tips?
- Can the 8%, normally used for allocated tips, be a matter agreed upon as reported tips between the employer and employees, so that the employees do not have to report the exact amount of their tips?
- Can an employer add the reported tips to just one payroll a month, even a special payment separate from the regular wage payment, and pay only the wage amount on the other payroll dates?
