Tip Income

[Catherine]

Can't find guidance on this anywhere.... (it's probably staring me in the face and I'm just not seeing it, like the USB cable I looked for for a half-hour that was on my desktop in plain sight).

Client has part-time work in a restaurant. This person is NOT a table server; instead is responsible for getting sodas and fountain drinks ready for servers, but does wait on some few folks who sit at the counter. Instead of server wages of ~ $3.00/hour, client is paid $9.50/hour because no tip income is expected. However, client did get about $600 total tips last year.

How do I report this? I won't bother folks with the different ways I've considered and looked up.

Thanks,

Catherine

[Tax Prep by Deb]

On line 7 of 1040, use the bunny hop and there is a place to include the income. Then you will need to file Form 4137 to report the social security and medicare tax

Deb!

[Catherine]

On line 7 of 1040, use the bunny hop and there is a place to include the income. Then you will need to file Form 4137 to report the social security and medicare tax

Deb!

The problem I have with this is on the Form 4137, Line 1a -- "Name of employer to whom you were required to, but did not report all your tips". The employer does get tip information from the wait staff - but specifically does NOT accept this information from the counter staff. That means this person may be subject to a 50% penalty for not reporting information that the employer will not accept.

So I was wondering if I'd missed something somewhere. But it sounds more like the employer is missing their own duties. Sigh.

Catherine

[Kea]

I have a problem with the wording, also. I have a client who is a tour guide. The travel agency does not require her to report her tip income (and doesn't do anything with the info even if reported). When I fill out the form, I will usually add a comment that she is not required to report it. She's never told me that IRS has ever questioned it.

[Catherine]

I have a problem with the wording, also. I have a client who is a tour guide. The travel agency does not require her to report her tip income (and doesn't do anything with the info even if reported). When I fill out the form, I will usually add a comment that she is not required to report it. She's never told me that IRS has ever questioned it.

I'd planned on adding a statement. It will about double the length of this otherwise super-simple return, LOL.

Catherine

[Redneck]

I have a problem with the wording, also. I have a client who is a tour guide. The travel agency does not require her to report her tip income (and doesn't do anything with the info even if reported). When I fill out the form, I will usually add a comment that she is not required to report it. She's never told me that IRS has ever questioned it.

The employee receiving tips that exceed $20.00 in a given month is required by the internal revenue code to report them to the employer. It doesn't matter whether the employer requires the tips to be reported. Granted, if an employer doesn't want to be bothered with it, it puts the employee in the position of risking his/her job if he/she complies with the reporting requirement and the employer is incovenienced by the need to meet the employer requirements imposed by the revenue code. However, I believe our responsibility is clear. Once we have been made aware that the client received tips that should have been reported to the employer, we should advise the client to complete Form 4137. If the client declines to do that, I would decline to complete the tax return.