| If you work in a service where you get tips, | | | | going. |
| guess what? The IRS expects you to report | | | | To make things a little more brutal, the internal |
| them and pay taxes on them. | | | | revenue service requires you to take some steps |
| Your Tip Earnings and Taxes | | | | in reporting tips. If your tips total $20 or more in |
| The internal revenue service takes a very simple | | | | any calendar month from a single job, you are |
| approach to tips. It views all tips you make in | | | | supposed to report the total to the employer by |
| your job as taxable income that must be | | | | the 10th day of the next month. The employer is |
| reported and for which taxes must be paid. Put | | | | then supposed to withhold federal income tax, |
| another way, the IRS has a simple but brutal | | | | social security and Medicare taxes from your |
| view towards taxes | | | | paycheck. Keep in mind that the failure to do so |
| Now tips come in different forms. Some are | | | | can lead to the placement of a 50 percent |
| received directly from customers while others are | | | | penalty on your taxes. Obviously, the IRS is fairly |
| automatically added to the customer's bill. The IRS | | | | serious about getting its money. |
| takes the position you must report and pay taxes | | | | Tips paid to waitresses, bartenders, barbacks and |
| on both amounts. This also includes taxes you | | | | so on are a hot spot with the IRS and always |
| earn through any group splitting where all tips are | | | | have. Since tips tend to be given in cash form, |
| collected together and then split amongst the | | | | the potential for forgetting to report them is |
| employees. On top of this, the IRS also takes the | | | | particularly high. The IRS seems to think so and |
| view that any non-cash tips such as tickets to | | | | has shown a generally aggressive attitude on the |
| something are also income that should be | | | | subject. If you indicate you are a waitress or |
| reported and taxes paid on. Put another way, the | | | | bartender on your tax return, but fail to report |
| internal revenue services gets you coming and | | | | any tip income, it could be audit time. |