How to Track and Report Tips: Tax Tips for Cashier

How to Track and Report Tips: Tax Tips for Cashier Key Takeaways

• All tip income, including cash, credit card, and noncash tips, is taxable and must be reported to employers and the IRS.
• Cashiers must keep a daily log of tips using IRS Form 4070A or a personal records system to ensure accuracy.
• If tips total $20 or more in a month, they must be reported to the employer by the 10th of the following month for proper tax withholding.

Proper tipping income management is essential for cashiers to comply with tax laws and avoid penalties.

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This guide explains how to track, report, and handle tip income accurately as a cashier.

1. Understanding Tip Income for Cashiers

Tips are voluntary payments given by customers for services. For cashiers, tips can come in several forms:

• Cash Tips: Direct monetary gifts handed to the cashier.
• Credit/Debit Card Tips: Tips added to a card payment and later distributed to the cashier by the employer.
• Noncash Tips: Any items or services of value, like tickets or vouchers, received as a tip.

Regardless of form, all tips count as taxable income. This means they must be included in income reporting and are subject to federal income tax as well as Social Security and Medicare taxes.

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2. Keeping a Daily Tip Record for Accurate Reporting

Maintaining an accurate, daily record of tips is crucial for cashiers to meet tax requirements and avoid discrepancies.

One way to do this is by using IRS Form 4070A, “Employee's Daily Record of Tips.” This form helps employees note each tip receipt by date and amount, including any noncash tips.

If the IRS form is not used, cashiers can keep a personal diary or logbook documenting:

• The date and amount of each tip received.
• The value of any noncash tips.
• Any tips paid out to other employees through tip-sharing arrangements.

Consistent record-keeping ensures you have accurate documentation to support tax reporting and helps resolve any issues should the IRS inquire.

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3. Reporting Tips to Your Employer

Federal law requires cashiers to report tips totaling $20 or more per month to their employer by the 10th day of the following month. This timely reporting helps employers comply with tax withholding obligations.

The tip report you provide to your employer must include:

• Your full name, address, and Social Security number.
• Your employer’s name and address.
• The total amount of tips you received during the month.

Employers use this information to withhold the correct federal income and payroll taxes and to prepare your Form W-2 at year-end.

4. Reporting Tip Income on Your Tax Return

All tip income must be reflected in your federal tax return. Tips you report to your employer will be included on your Form W-2, Wage and Tax Statement.

If you did not report your tips to your employer during the year, you are still required to report unreported tips to the IRS. This is done by filing Form 4137, “Social Security and Medicare Tax on Unreported Tip Income,” which ensures these taxes are paid.

Failing to report tip income can lead to penalties and interest, so accuracy and honesty in reporting are vital.

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5. Recent Legislative Changes Affecting Tip Income

Starting July 4, 2025, the "No Tax on Tips Act" permits employees in traditionally tipped jobs, such as cashiers, to deduct up to $25,000 of cash tip income from their federal taxes from 2025 to 2028.

This deduction phases out for single taxpayers earning above $150,000 and couples above $300,000 annually. Further guidance on eligible occupations and reporting procedures is anticipated from the U.S. Treasury and IRS.

This new legislation aims to reduce the tax burden on workers relying heavily on tips, but cashiers should stay informed to maximize benefits and maintain compliance.

Additional information about this legislation is available in no tax on tips.

6. Employer Responsibilities in Tip Reporting

Employers must accurately collect and maintain employee tip reports, ensuring that income taxes and payroll taxes on tips are properly withheld.

Their responsibilities include:

• Collecting tip reports from employees monthly.
• Withholding income tax, Social Security, and Medicare taxes on reported tips.
• Paying the employer’s portion of Social Security and Medicare taxes on wages and tips.
• Reporting tip income to the IRS using Form 941, “Employer’s Quarterly Federal Tax Return.”

Employers also have a role in educating employees about why accurate tip reporting is important and establishing systems that facilitate reliable tip tracking.

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7. Best Practices for Cashiers in Tracking and Reporting Tips

Cashiers should adopt good habits to ensure compliance and ease during tax season, including:

• Maintaining daily tip records promptly and accurately.
• Reporting tips over $20 to the employer by the required deadline.
• Including all types of tips — both cash and noncash — in records and reports.
• Staying informed about legislative updates that affect tip taxation.
• Seeking clarification or help from employers or tax professionals as needed.

By following these best practices, cashiers protect themselves from tax issues and demonstrate professionalism.

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8. Useful Government Resources for Tip Reporting

• IRS Publication 531, Reporting Tip Income – Detailed instructions on how to report tip income.
• IRS Topic No. 761, Tips – Withholding and Reporting – Overview of tax rules related to tips.
• IRS Form 4070A, Employee's Daily Record of Tips – Official form for daily tip tracking.

How to Track and Report Tips: Summary

Cashiers must diligently track and report all forms of tip income to comply with tax regulations fully. Keeping detailed daily records, reporting monthly tips over $20 to your employer, and accurately reporting tips on your tax return are crucial steps.

Understanding recent legislative changes and cooperating with employers strengthens compliance. Use government resources and maintain good records to protect your income and avoid tax issues.

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