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My freetaxes com 6. My freetaxes com   Tip Income Table of Contents Introduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. My freetaxes com Reporting Tips to Your EmployerElectronic tip statement. My freetaxes com Final report. My freetaxes com Reporting Tips on Your Tax Return Allocated Tips Introduction This chapter is for employees who receive tips. My freetaxes com All tips you receive are income and are subject to federal income tax. My freetaxes com You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. My freetaxes com The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. My freetaxes com Reporting your tip income correctly is not difficult. My freetaxes com You must do three things. My freetaxes com Keep a daily tip record. My freetaxes com Report tips to your employer. My freetaxes com Report all your tips on your income tax return. My freetaxes com  This chapter will explain these three things and show you what to do on your tax return if you have not done the first two. My freetaxes com This chapter will also show you how to treat allocated tips. My freetaxes com For information on special tip programs and agreements, see Publication 531. My freetaxes com Useful Items - You may want to see: Publication 531 Reporting Tip Income 1244 Employee's Daily Record of Tips and Report to Employer Form (and Instructions) 4137 Social Security and Medicare Tax on Unreported Tip Income 4070 Employee's Report of Tips to Employer Keeping a Daily Tip Record Why keep a daily tip record. My freetaxes com   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. My freetaxes com How to keep a daily tip record. My freetaxes com   There are two ways to keep a daily tip record. My freetaxes com You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. My freetaxes com You should keep your daily tip record with your tax or other personal records. My freetaxes com You must keep your records for as long as they are important for administration of the federal tax law. My freetaxes com For information on how long to keep records, see How long to keep records in chapter 1. My freetaxes com    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. My freetaxes com To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244. My freetaxes com Also, Publication 1244 is available online at www. My freetaxes com irs. My freetaxes com gov/pub/irs-pdf/p1244. My freetaxes com pdf. My freetaxes com Publication 1244 includes a 1-year supply of Form 4070A. My freetaxes com Each day, write in the information asked for on the form. My freetaxes com   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. My freetaxes com Although you do not report these tips to your employer, you must report them on your tax return. My freetaxes com   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). My freetaxes com Then, each workday, write the date and the following information. My freetaxes com Cash tips you get directly from customers or from other employees. My freetaxes com Tips from credit and debit card charge customers that your employer pays you. My freetaxes com The value of any noncash tips you get, such as tickets, passes, or other items of value. My freetaxes com The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. My freetaxes com Electronic tip record. My freetaxes com   You can use an electronic system provided by your employer to record your daily tips. My freetaxes com If you do, you must receive and keep a paper copy of this record. My freetaxes com Service charges. My freetaxes com    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. My freetaxes com This is part of your wages, not a tip. My freetaxes com See examples below. My freetaxes com Example 1. My freetaxes com Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. My freetaxes com Jane’s bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. My freetaxes com Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. My freetaxes com Do not include the 18% charge in your tip diary. My freetaxes com Service charges that are paid to you are considered wages, not tips. My freetaxes com Example 2. My freetaxes com Good Food Restaurant also includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. My freetaxes com David’s bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of his charges for food and beverages at the bottom of the bill beneath the signature line. My freetaxes com Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. My freetaxes com Be sure to include this amount in your tip diary. My freetaxes com Reporting Tips to Your Employer Why report tips to your employer. My freetaxes com   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). My freetaxes com What tips to report. My freetaxes com   Report to your employer only cash, check, and debit and credit card tips you receive. My freetaxes com   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. My freetaxes com   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. My freetaxes com Do not report to your employer any portion of the tips you receive that you pass on to other employees. My freetaxes com However, you must report tips you receive from other employees. My freetaxes com    Do not report the value of any noncash tips, such as tickets or passes, to your employer. My freetaxes com You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips. My freetaxes com How to report. My freetaxes com    If your employer does not give you any other way to report tips, you can use Form 4070. My freetaxes com Fill in the information asked for on the form, sign and date the form, and give it to your employer. My freetaxes com To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. My freetaxes com   If you do not use Form 4070, give your employer a statement with the following information. My freetaxes com Your name, address, and social security number. My freetaxes com Your employer's name, address, and business name (if it is different from your employer's name). My freetaxes com The month (or the dates of any shorter period) in which you received tips. My freetaxes com The total tips required to be reported for that period. My freetaxes com You must sign and date the statement. My freetaxes com Be sure to keep a copy with your tax or other personal records. My freetaxes com   Your employer may require you to report your tips more than once a month. My freetaxes com However, the statement cannot cover a period of more than 1 calendar month. My freetaxes com Electronic tip statement. My freetaxes com   Your employer can have you furnish your tip statements electronically. My freetaxes com When to report. My freetaxes com   Give your report for each month to your employer by the 10th of the next month. My freetaxes com If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. My freetaxes com Example. My freetaxes com You must report your tips received in September 2014 by October 10, 2014. My freetaxes com Final report. My freetaxes com   If your employment ends during the month, you can report your tips when your employment ends. My freetaxes com Penalty for not reporting tips. My freetaxes com   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, and Additional Medicare taxes or railroad retirement tax you owe on the unreported tips. My freetaxes com (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. My freetaxes com ) The penalty amount is in addition to the taxes you owe. My freetaxes com   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. My freetaxes com To do so, attach a statement to your return explaining why you did not report them. My freetaxes com Giving your employer money for taxes. My freetaxes com   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. My freetaxes com If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. My freetaxes com   If you do not give your employer enough money, your employer will apply your regular pay and any money you give in the following order. My freetaxes com All taxes on your regular pay. My freetaxes com Social security, Medicare, and Additional Medicare taxes or railroad retirement taxes on your reported tips. My freetaxes com Federal, state, and local income taxes on your reported tips. My freetaxes com    Any taxes that remain unpaid can be collected by your employer from your next paycheck. My freetaxes com If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. My freetaxes com See Publication 505, Tax Withholding and Estimated Tax, for more information. My freetaxes com    Uncollected taxes. My freetaxes com You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2013. My freetaxes com These uncollected taxes will be shown on your 2013 Form W-2. My freetaxes com See Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. My freetaxes com Reporting Tips on Your Tax Return How to report tips. My freetaxes com    Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; or Form 1040EZ, line 1. My freetaxes com What tips to report. My freetaxes com   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. My freetaxes com Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. My freetaxes com Add to the amount in box 1 only the tips you did not report to your employer. My freetaxes com    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. My freetaxes com    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. My freetaxes com   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. My freetaxes com Cash and charge tips you received that totaled less than $20 for any month. My freetaxes com The value of noncash tips, such as tickets, passes, or other items of value. My freetaxes com Example. My freetaxes com Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. My freetaxes com Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. My freetaxes com He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. My freetaxes com Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages plus $7,000 reported tips) in box 1. My freetaxes com He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. My freetaxes com Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. My freetaxes com    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. My freetaxes com To report these taxes, you must file a return even if you would not otherwise have to file. My freetaxes com You must use Form 1040. My freetaxes com (You cannot file Form 1040EZ or Form 1040A. My freetaxes com )    Use Form 4137 to figure social security and Medicare taxes. My freetaxes com Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. My freetaxes com Use Form 8959 to figure Additional Medicare Tax. My freetaxes com    If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. My freetaxes com To get railroad retirement credit, you must report tips to your employer. My freetaxes com Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer. My freetaxes com   You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. My freetaxes com For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. My freetaxes com   If your employer could not collect all the social security and Medicare taxes or railroad retirement tax you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). My freetaxes com You must report these amounts as additional tax on your return. My freetaxes com Unlike the uncollected portion of the regular (1. My freetaxes com 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported in box 12 of Form W-2 with code B. My freetaxes com    To report these uncollected taxes, you must file a return even if you would not otherwise have to file. My freetaxes com You must report these taxes on Form 1040, line 60. My freetaxes com See the instructions for Form 1040, line 60. My freetaxes com (You cannot file Form 1040EZ or Form 1040A. My freetaxes com ) Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. My freetaxes com They are not included in box 1 with your wages and reported tips. My freetaxes com If box 8 is blank, this discussion does not apply to you. My freetaxes com What are allocated tips. My freetaxes com   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. My freetaxes com Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. My freetaxes com No income, social security, Medicare, Additional Medicare or railroad retirement taxes are withheld on allocated tips. My freetaxes com How were your allocated tips figured. My freetaxes com   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). My freetaxes com Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. My freetaxes com For information about the exact allocation method used, ask your employer. My freetaxes com Must you report your allocated tips on your tax return. My freetaxes com   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. My freetaxes com Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. My freetaxes com Add to the amount in box 1 only the tips you did not report to your employer. My freetaxes com This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated figures. My freetaxes com   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. My freetaxes com How to report allocated tips. My freetaxes com   Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. My freetaxes com (You cannot file Form 1040A or Form 1040EZ when you have allocated tips. My freetaxes com )    Because social security, Medicare, and Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. My freetaxes com Complete Form 4137, and include the allocated tips on line 1 of the form. My freetaxes com See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. My freetaxes com Prev  Up  Next   Home   More Online Publications
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Today, it’s quick and easy to get a credit card approved, transfer money from one account to another, renew your driver’s license, fill a prescription from your doctor at your local pharmacy, use store loyalty cards, and purchase products online. But you pay for this convenience by providing more opportunities for your personal information to be changed, stolen, or reported inaccurately. Companies can also use the information you have shared to direct their future marketing efforts or can sell the information to other companies. To help protect your privacy, follow these tips:

  • Look for privacy statements on websites, sales materials, and forms you fill out. If a website claims to follow a set of established voluntary standards, read the standards. Don't assume they provide the level of privacy you want.
  • Ask what information will be collected and how it may be used.
  • Only provide the purchase date, model/serial numbers, and your contact information of warranty registration forms.
  • Discuss privacy with others in your home. Everyone, even children, should understand what information is not appropriate to share on the phone, while using a computer, and in other situations.

Check with your state or local consumer agency to find out whether any state laws that help protect your privacy. Some companies and industry groups have also adopted voluntary policies that address privacy concerns.

Creating Secure Passwords

The number of passwords that you need on a daily basis can be overwhelming. It is tempting to use the same password across several sites; however to get the most protection available, you should use different passwords on each site and change your passwords periodically. The goal for creating passwords is to strike a balance between being something that is easy to remember and unique. Some general tips for creating a secure password include:

  • Use a mix of uppercase and lowercase letters, numbers, and special characters.
  • The longer password, the better it is.
  • Don’t use your name, birthday, license plate, favorite sports teams or other facts that are easily guessed.
  • Create a password based on a phrase. For example “A stitch in time saves nine” can be translated into the password “Ast!Ts9”. where each character represents a word in the phrase.
  • If you must use the same password on several websites, add a prefix or suffix. For example, use “Ast!Ts9:4bnk”for your bank account and “Eml: Ast!Ts9” for your email account.

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