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Your Tip Earnings And Taxes - Corrected |
By:
Richard A. Chapo |
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If you work in a service where you get tips, guess what? The IRS
expects you to report them and pay taxes on them.
Your Tip Earnings and Taxes
The internal revenue service takes a very simple approach to
tips. It views all tips you make in your job as taxable income
that must be reported and for which taxes must be paid. Put
another way, the IRS has a simple but brutal view towards taxes
Now tips come in different forms. Some are received directly
from customers while others are automatically added to the
customer's bill. The IRS takes the position you must report and
pay taxes on both amounts. This also includes taxes you earn
through any group splitting where all tips are collected
together and then split amongst the employees. On top of this,
the IRS also takes the view that any non-cash tips such as
tickets to something are also income that should be reported and
taxes paid on. Put another way, the internal revenue services
gets you coming and going.
To make things a little more brutal, the internal revenue
service requires you to take some steps in reporting tips. If
your tips total $20 or more in any calendar month from a single
job, you are supposed to report the total to the employer by the
10th day of the next month. The employer is then supposed to
withhold federal income tax, social security and Medicare taxes
from your paycheck. Keep in mind that the failure to do so can
lead to the placement of a 50 percent penalty on your taxes.
Obviously, the IRS 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. Since tips tend to be
given in cash form, 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. If you indicate
you are a waitress or bartender on your tax return, but fail to
report any tip income, it could be audit time.
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Article Source: http://www.friendsofvista.org/articles/article29250.html |
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