How to Track and Report Tips: Tax Tips for Waitress

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

All tips, including cash, credit card, and non-cash, are taxable income and must be reported.
Waitresses must keep daily tip records and report tips of $20 or more per month to their employer by the 10th of the following month.
The new "No Tax on Tips Act" allows a cash tip deduction up to $25,000 for tax years 2025-2028, with income limits.

Tracking and reporting tips accurately is essential for any waitress to comply with IRS tax rules and avoid penalties.

This article explains daily record-keeping, reporting requirements, and recent tax law changes that affect waitresses.

1. Daily Tip Record-Keeping for Waitresses

All tip income you receive as a waitress must be tracked daily. This includes cash tips you directly receive from customers, tips shared among employees, and tips in non-cash forms such as tickets or passes.

Keeping an accurate daily log helps ensure that you can correctly report your earnings during tax season and avoid any penalties for unreported income.

While IRS Form 4070A was traditionally used for this purpose, it has been discontinued. Today, you can maintain your log using a personal notebook, an electronic spreadsheet, or any employer-provided digital system.

Your daily record should include:

The date.
Total amount of cash tips received directly.
Tips received through tip-sharing arrangements with other employees.
Value of any non-cash tips.

Employers looking to improve their tip reporting and compliance can refer to our restaurant staff hiring spotlight for recruitment best practices.

2. How to Report Tips to Your Employer

If you earn $20 or more in tips during any calendar month, you must report the total tip amount to your employer by the 10th day of the following month.

This reporting requirement helps your employer withhold the correct amount of federal income, Social Security, and Medicare taxes from your paycheck.

Your tip report should include:

Your name and address.
Your Social Security number.
Your employer's name and address.
The reporting period (the calendar month the tips were earned).
The total amount of tips received.

Failing to report tips properly to your employer can result in penalties and interest on the unpaid taxes, so timely and accurate reporting is crucial.

Employers seeking guidance can also check out employer branding in restaurant job postings to attract responsible and qualified staff for tip-related positions.

3. Reporting Tips on Your Annual Tax Return

All tip income earned must be reported on your annual income tax return.

Tips you report to your employer will appear on your Form W-2, Wage and Tax Statement, which summarizes your earnings and withheld taxes.

If you have unreported tips, you need to calculate and pay Social Security and Medicare taxes on this income by filing IRS Form 4137, "Social Security and Medicare Tax on Unreported Tip Income."

Using Form 4137 helps ensure you meet your tax obligations even if your tips weren't included on your W-2.

For career insights related to this role, explore the detailed waitress job description page.

4. Understanding the No Tax on Tips Act and Its Impact

Starting July 4, 2025, the "No Tax on Tips Act" allows workers in tipped occupations, like waitresses, to deduct up to $25,000 of cash tips from their federal taxable income for tax years 2025 through 2028.

This means that the first $25,000 in cash tips you earn may not be subject to federal income tax, significantly reducing your tax burden.

However, this deduction phases out for single individuals earning over $150,000 annually and couples filing jointly with combined income above $300,000.

It's important to note that this deduction applies only to cash tips—not to electronic tip payments or non-cash tips such as tickets.

The U.S. Treasury and IRS are expected to provide additional guidance on qualifying occupations and how to claim this benefit.

Learn more about this topic from our spotlight on No Tax on Tips.

5. Employer Responsibilities Regarding Tip Reporting

Your employer plays a key role in ensuring tip income is properly reported and taxed.

Employers are responsible for collecting your reported tip amounts and withholding the necessary federal income, Social Security, and Medicare taxes.

They must maintain accurate records of tip income and provide you with the relevant tax forms such as Form W-2 each year.

Employers are also required to inform and educate employees about the importance of reporting tips and complying with IRS regulations.

If you're an employer, discover tax tips for restaurant owners to handle these responsibilities effectively.

6. Best Practices for Waitresses to Track and Report Tips

To stay compliant and avoid tax issues, waitresses should adopt the following practices:

Keep a detailed daily tip log, including all types of tips.
Use electronic methods or apps if available for easy recording and calculations.
Report tips totaling $20 or more promptly to your employer every month.
Retain copies or proofs of your reports and any tip records.
Stay informed about tax law changes like the "No Tax on Tips Act".
Consult tax professionals or IRS resources if unsure about reporting requirements.

Employers seeking to retain top talent should review the strategies to reduce restaurant employee turnover.

7. Useful Resources for Waitresses on Tip Income Reporting

For more detailed information on tracking and reporting tips, you can visit these official government resources:

Additional career advice for waitresses can be found in the waitress interview questions resource.

Conclusion: How to Track and Report Tips: Tax Tips for Waitress

Accurately tracking and reporting tip income is essential for waitresses to comply with IRS requirements and avoid penalties.

Maintain daily tip records, report monthly tip amounts to your employer when necessary, and ensure all tips are reported on your tax return.

Stay aware of recent legislative changes like the "No Tax on Tips Act" to benefit from available deductions.

Using these practices helps ensure your earnings are documented correctly and your tax obligations are met efficiently and lawfully.

Employers can also explore how to hire servers and waiters to maintain a trustworthy and compliant team.

01. What types of tips must a waitress report for tax purposes?

Waitresses must report all tips, including cash, credit card, tip-sharing, and non-cash tips such as tickets or passes, as taxable income.

02. When must waitresses report their monthly tips to employers?

Waitresses must report tip income of $20 or more per calendar month to their employer by the 10th day of the following month to ensure correct tax withholding.

03. How does the No Tax on Tips Act affect waitresses?

Starting in 2025, waitresses can deduct up to $25,000 of cash tips from their federal taxable income for tax years 2025-2028, subject to income limitations.

04. What records should waitresses keep to comply with IRS rules?

Waitresses should keep detailed daily logs of all types of tips received, including cash, tip-sharing amounts, and non-cash tips, using notebooks, spreadsheets, or employer digital systems.

05. What responsibilities do employers have regarding tip reporting?

Employers must collect reported tip amounts, withhold applicable taxes, maintain accurate tip income records, provide tax forms, and educate employees on compliance.