If you work in a service where you get tips, guess what? The IRS expects you to report them and pay taxes on them.

When it Comes to Your Tip Earnings and Taxes

A very simple approach is taken by the IRS when it comes to tips. Here, it will view all tips you make in your job as taxable income that must be reported and for which taxes must be paid. This would also mean that the IRS has a simple but brutal view towards taxes.

Did you know that tips now come in different forms? There are those that are received directly from customers while others are automatically added to the customer’s bill. What the IRS must do is take the position you must report and pay taxes on both amounts. Here, taxes that you earn through any group splitting where all tips are collected together and then split amongst the employees are also included. Aside from all of this, another thing that IRS does is take the view that any non-cash tips such as tickets to something are also income that should be reported and taxes paid on. This would also mean that the Internal Revenue Services also gets you coming and going.

Things can actually be made a little more brutal when the Internal Revenue Service requires you to take some steps in reporting tips. You are supposed to report the total to the employer by the 10th day of the next month if your tips total $20 or more in any calendar month from a single job. What the employer is supposed to do is withhold federal income tax, social security and Medicare taxes from your paycheck. When you fail to do this, then keep in mind that this can lead to the placement of a 50 percent penalty on your taxes. The IRS, obviously, is fairly serious about getting its money.

Tips paid to waitresses, bartenders, barbacks and so on are a hot spot with the IRS and always have. Tips tend to be given in cash form and because of that, the potential for forgetting to report them is particularly high. The IRS seems to think so and has shown a generally aggressive attitude on the subject. It could audit time if you indicate you are a waitress or bartender on your tax return but fail to report any tip income.

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