Cash tips are income to report, even when a small monthly amount does not require an employer tip report. If your cash and charged tips from one job total $20 or more in a calendar month, report them to the employer. A daily record helps you separate tips kept, tips received through sharing, and tips passed to others.
The $20 rule is monthly and per job
The IRS distinguishes reporting tips to an employer from reporting income on a tax return:
| Situation | What to do |
|---|---|
| $20 or more in cash and charged tips in a month at one job | Report to that employer under its reporting process and IRS deadlines |
| Less than $20 in that month at that job | No employer tip report is required for that amount, but include it as income on your return |
| Tips received from coworkers | Include them in the tips received and retained |
| Tips paid to coworkers through tip sharing | Keep the payout record; do not report as your own tips money passed on to others |
| Noncash gifts, such as tickets | Record their value for your tax return; do not include them in the employer cash-tip report |
Employer tip reports are generally due by the tenth day of the following month; the IRS provides an adjustment when that date falls on a weekend or legal holiday. Employers may require reports more often. See Publication 531 and Topic 761.
An example across two jobs
Suppose you retain $18 in tips at one occasional job during October, and $600 at another. The amounts belong to two separate employer-reporting checks. The $18 is below the first job's monthly threshold; the $600 is above the second job's threshold. Both still belong in your income records.
The same $18 earned on one shift at a job where you receive another $100 later that month is different: the monthly total at that employer is $118. Do not apply the threshold one shift at a time.
What if tips were not reported correctly?
Keep the original records, identify what was omitted, and follow the applicable IRS correction and reporting instructions. Form 4137 may be required to calculate Social Security and Medicare taxes on tips not reported to an employer. The amounts depend on the tax rules and your circumstances; multiplying all tips by 7.65% is not a complete personal tax calculation.
Publication 531 describes a possible penalty for failing to report tips to an employer as required and the reasonable-cause exception. A tip deduction does not erase that reporting requirement. Use the instructions or a tax professional when correcting a previous report or return.
Allocated tips are a separate entry
Certain large food or beverage establishments allocate tips when reported amounts fall below the applicable percentage of receipts. Allocated tips appear in W-2 Box 8 and are not the same as the tips you personally reported.
Compare the allocation with your actual daily records and follow the allocated-tip instructions in Publication 531. Do not automatically add an allocated amount to tips already counted, or discard it without checking the instructions.
How the tip deduction fits in
For 2025–2028, eligible taxpayers may claim a federal deduction for qualified tips. The deduction reduces taxable income, not AGI, and has reporting, occupation, filing-status, and income limits. It does not mean every logged tip is deductible or that all taxes on tips disappear.
Read the source-linked tip deduction guide, or use the deduction calculator to model the cap and phase-out. Neither a calculator nor a personal log submits an employer report or tax return.
Keep a record you can reconcile
Record tips received, tips paid out, recipient names, and the dates and workplace. Save employer payout statements and your checkout slips. If a figure already reflects a tip-out, do not subtract it again.
The free daily tip log works as a spreadsheet or printable sheet. TipScan lets you enter your tips and hours, with free CSV export. Keep original receipt photos separately.
Reviewed against IRS Publication 531 and Topic 761 on October 6, 2026. General information, not individual tax advice.