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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13328
Experience:  15years with H & R Block. Divisional leader, Instructor
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Employee tending bar local VFW. She is also on disability.

Customer Question

Employee tending bar for the local VFW for tips. She is also on disability.
My understanding is that the IRS considers these tips as income, therefore withholding should be done and employer taxes paid.
I have "two" so called experts telling me this isn't the case as she is doing this voluntarily.
Travis
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

Hello,

You are correct.

Straight form the IRS:

"Tips your employees receive from customers are generally subject to withholding. Employees are required to claim all tip income received. This includes tips you paid over to the employee for charge customers and tips the employee received directly from customers."

Employees must report tip income on Form 4070, Employee's Report of Tips to Employer (PDF), or on a similar statement. This report is due on the 10th day of the month after the month the tips are received. This statement must be signed by the employee and must show the following:

  • The employee's name, address, and SSN.
  • Your name and address.
  • The month or period the report covers.
  • The total tips received.

No report is required from an employee for months when tips are less than $20.

As an employer, you must ensure that the total tip income reported to you during any pay period is, at a minimum, equal to 8% of your total receipts for that period.

The person is not coming into the VFW and "voluntarily" serving. Someone "hired" them. That person is the employer and should be requesting the information.

Expert:  Robin D. replied 1 year ago.

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.