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How to report cash tips to your employer
Who has to report: the $20 rule
Every employee who receives $20 or more in tips in a calendar month while working for one employer must report them to that employer. The $20 is counted per employer: $15 at one job and $15 at another means neither employer gets a report for that month. Below $20, you don't report to the employer and the tips are not subject to Social Security and Medicare tax, but they are still income for income tax.
What to report and what not
Report
- Cash tips customers hand you
- Credit and debit card tips your employer pays you
- Tips you receive from other employees, such as a tip pool or a server's tip-out to you
Don't report to your employer
- The tips you paid out to bussers, bar, runners or hosts (record them instead)
- Service charges and automatic gratuity (your employer pays these as wages)
- Non-cash tips such as tickets or goods: not reported to the employer, but their value still goes on your tax return
When: the 10th of the month
Each month's report is due by the 10th of the next month. If the 10th is a Saturday, Sunday or legal holiday, it is due the next day that isn't. Your employer can ask for reports more often (for example every shift or every pay period), and if you leave a job mid-month you report when you leave.
| Tips received in | Report by | Why not the 10th |
|---|---|---|
| October 2026 | Tuesday, November 10, 2026 | |
| November 2026 | Thursday, December 10, 2026 | |
| December 2026 | Monday, January 11, 2027 | Jan 10 is a Sunday |
| January 2027 | Wednesday, February 10, 2027 | |
| February 2027 | Wednesday, March 10, 2027 | |
| March 2027 | Monday, April 12, 2027 | Apr 10 is a Saturday |
| April 2027 | Monday, May 10, 2027 | |
| May 2027 | Thursday, June 10, 2027 | |
| June 2027 | Monday, July 12, 2027 | Jul 10 is a Saturday |
| July 2027 | Tuesday, August 10, 2027 | |
| August 2027 | Friday, September 10, 2027 | |
| September 2027 | Tuesday, October 12, 2027 | Oct 10 is a Sunday, Oct 11 is Columbus Day |
| October 2027 | Wednesday, November 10, 2027 | |
| November 2027 | Friday, December 10, 2027 | |
| December 2027 | Monday, January 10, 2028 |
Dates account for weekends and federal holidays. Tips you report on time count as income for the month you report them, so December tips reported in January belong to the next tax year.
How: what the report must say
Use your employer's system (many POS systems ask for cash tips at clock-out). If your employer has none, give a written statement, signed and dated, with:
- Your name, address and Social Security number
- Your employer's name, address and business name
- The month or the dates the report covers
- Your total tips for that period
No IRS form is required: Publication 531 lists Forms 4070 and 4070A as historical. Keep a copy of every report.
Keep a daily tip record
The IRS asks you to keep a daily record of your tips. For each day, write down:
- Cash tips you received directly from customers or from other employees
- Credit and debit card tips your employer paid you
- The value of any non-cash tips
- Tips you paid out to other employees, and their names
If you use your employer's electronic system, keep a printout or copy too. A daily log is also what proves the real amount if your W-2 shows allocated tips you didn't actually get.
How reported tips show on your W-2
| Box | What it holds |
|---|---|
| Box 1 | Wages plus the tips you reported |
| Box 5 | Medicare wages and tips (no cap) |
| Box 7 | Social Security tips you reported (box 3 + box 7 stop at the wage base, $184,500 for 2026) |
| Box 8 | Allocated tips, not included in boxes 1, 3, 5 or 7 |
| Box 12, code TP | New for 2026: total cash tips you reported to your employer |
| Box 12, codes A and B | Social Security and Medicare tax on tips your employer couldn't withhold; you pay it with your return |
| Box 14b | New for 2026: your tipped occupation code (up to two) |
Compare box 12 code TP with your own log. If they differ, ask your employer before you file.
Tips you didn't report: Form 4137
File Form 4137 with your Form 1040 if you received $20 or more in tips in a month that you didn't fully report to your employer, or if you have allocated tips you must include in income. It figures the Social Security (6.2%) and Medicare (1.45%) tax on those tips; the tax goes on Schedule 2 and the tips are added to your wages on Form 1040.
Why it matters for No Tax on Tips
Only reported tips can be qualified tips: from 2026, they must be on your W-2 (box 12 code TP), a 1099, or Form 4137. Reporting on time keeps the Social Security credit you earn for retirement and gets you the federal deduction of up to $25,000.
FAQ
Do I have to report tips under $20 a month?
Not to your employer. If your tips from one job are under $20 in a month, you don't report them to that employer and you don't owe Social Security or Medicare tax on them, but they are still income on your tax return.
Do I report the tips I give to the busser or bar?
No. Report the tips you keep plus the tips you receive from others (for example through a tip pool). Don't report the part you paid out, but write down who you paid and how much.
Is there an IRS form for the monthly report?
No form is required. Use your employer's tip-reporting system, or a signed and dated written statement. IRS Publication 531 now calls the old Forms 4070 and 4070A historical.
What if I forgot to report cash tips?
Include them on your tax return and file Form 4137 to figure the Social Security and Medicare tax on them. You can owe a penalty of 50% of that tax unless you had reasonable cause.
Do card tips count toward the $20?
Yes. The $20 test counts cash, check, debit and credit card tips together, per employer, per month.
Can unreported cash tips get the No Tax on Tips deduction?
Only once they are reported on Form 4137 (or reported to your employer). Tips that never appear on a W-2, 1099 or Form 4137 are not qualified tips.
Keep the record the IRS asks for, in 10 seconds a shift
TipLedger logs cash tips, card tips and tip-outs per shift, marks which cash tips you reported to your employer, warns you when your tips fall under 8% of your sales, and estimates your No Tax on Tips deduction as the year goes. No ads, no account; your shifts stay on your iPhone and in your private iCloud.
Sources
- IRS Publication 531, Reporting Tip Income: irs.gov/publications/p531
- Form 4137, Social Security and Medicare Tax on Unreported Tip Income: irs.gov/pub/irs-pdf/f4137.pdf
- General Instructions for Forms W-2 and W-3 (2026): irs.gov/instructions/iw2w3
- T.D. 10044, qualified tips regulations: federalregister.gov