Here's How to Report Tip Money on Tax Return

It is important for taxpayers to correctly report tip income on their tax return. Taxpayers should save their receipts, as well as credit and debit receipts as they may have to provide copies to the IRS at a later date.Taxpayers must include all tips they receive in their gross income. This includes:

• Tips directly from customers.

• Tips added using credit, debit or gift cards.

• Tips from a tip-splitting arrangement with other employees.

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 to correctly report their tip income.

• Keep a daily tip record.

• Report tips to their employer.

• Report all tips on their income tax return.

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