Glossary
The words on your pay stub, your W-2 and your manager's tip-out sheet, explained in plain English.
A 2021 federal rule that limited tipped side work to 20 percent of hours and 30 minutes at a time; a federal appeals court struck it down in August 2024.
Tips a large restaurant assigns you in W-2 box 8 when staff reported under 8% of sales. It's an estimate you must deal with, not a payment.
A gratuity the restaurant adds to the bill on its own, often for large parties. The IRS treats it as a service charge, so the part paid to you is wages.
A tip paid in bills or coins. It's taxable income like any other tip, and only your own records show it, so log it every shift you work.
A tip a guest adds on a credit or debit card payment. Your employer pays it out and, under federal law, may keep no more than the card fee.
The hourly pay your employer gives you before tips. In a tipped job it's at least $2.13 under federal law, and higher in many states.
The tips you tell your employer you received. Due monthly once they hit $20 from a job, they're taxed through payroll and shown on your W-2.
A required charge a business adds to the bill. It's not a tip under federal law, and any part paid to you is wages, not tip income.
Money a customer chooses to give a worker for service, in an amount the customer decides. All tips are taxable income, cash or card.
The part of the minimum wage an employer may cover with your tips. Under federal law it's up to $5.12 an hour, with a cash wage of at least $2.13.
An arrangement where tips from several workers go into one pot and are split by a set formula. Owners, managers and supervisors can't take from it.
The share of your tips you pay to support staff such as bussers, runners or bartenders after a shift, often set as a percent of your sales.
Under federal law, a worker in a job where they customarily and regularly get more than $30 a month in tips, the group a tip credit can apply to.
The lowest hourly cash wage an employer can pay a tipped worker before tips. It's $2.13 under federal law, and many states set it higher.
The kitchen side of a restaurant: cooks, dishwashers and prep staff. Under federal law a required tip pool can include them only with no tip credit.
Food or drink the house gives a guest free, taken off the check with a manager's OK. It lowers the bill and often the tip, but maybe not your tip-out.
The guest-facing side of a restaurant: servers, bartenders, hosts, bussers and runners. Most tipped restaurant jobs are front of house.
A front of house worker who carries food from the kitchen to tables. Runners are usually paid through tip-outs or a tip pool, not by guests.
The group of tables you're assigned for a shift, also called a station. Your section shapes your sales, your tips and often your tip-out.
Untipped tasks tipped workers do around service, like rolling silverware or restocking. The 2021 federal 80/20 limit on it was struck down in 2024.
A way to figure your car deduction from what the car really cost you, such as gas, insurance, repairs and depreciation, times your business-use share.
The share of a car's total miles for the year that were for business, used to split costs like gas and insurance between business and personal use.
An adjustment that subtracts half of your self-employment tax from your income, lowering your AGI and income tax but not the self-employment tax.
The rule that you avoid the underpayment penalty if withholding and on-time estimated payments cover 90% of this year's tax or 100% of last year's.
Social Security and Medicare tax on your pay and reported tips: 7.65% from you in 2026, matched by another 7.65% from your employer.
The main federal income tax return, which pulls together your W-2s, tips, business profit, deductions and payments to show a refund or balance due.
The IRS form reporting card and payment app payments you got for goods or services, sent by apps for 2026 above $20,000 and 200 transactions.
The IRS form a business sends when it pays you $2,000 or more in 2026 for work as a nonemployee, such as contract or gig work.
The IRS form you file to pay Social Security and Medicare tax on tips you didn't report to your employer, including allocated tips from W-2 box 8.
The IRS form large restaurants and bars file each year to report sales and tips, and to figure allocated tips when reported tips run low.
The yearly form your employer sends showing wages, reported tips and taxes withheld, which for 2026 also lists your tips in box 12, code TP.
Expenses such as state and local taxes, mortgage interest, charity and large medical bills, listed on Schedule A instead of the standard deduction.
A tax deduction for driving your own car for business, figured with the IRS standard mileage rate or your actual costs, mostly for self-employed workers.
A record of each business trip, with the date, the miles and the business purpose, plus your total miles for the year, kept to back up a car deduction.
The half-time overtime premium federal law requires for hours over 40, which you can deduct from federal income tax for 2025 to 2028, up to $12,500 a year.
Voluntary cash or card tips, including shared tips, earned in an IRS-listed tipped job and properly reported, which count toward No Tax on Tips.
Tax you pay the IRS yourself during the year on income with no withholding, such as 1099 work, in four payments figured with Form 1040-ES.
The Form 1040 schedule for the new deductions: No Tax on Tips, No Tax on Overtime, car loan interest and the enhanced deduction for seniors.
The Form 1040 schedule where a sole proprietor, such as a 1099 driver or freelance bartender, reports business income, expenses and net profit.
The Form 1040 schedule that figures self-employment tax, the Social Security and Medicare tax you pay yourself on net earnings from your own work.
Social Security and Medicare tax on your own business profit: 15.3% on 92.35% of net earnings, owed once those earnings reach $400 for the year.
A flat amount that lowers income subject to income tax if you don't itemize: for 2026, $16,100 single and $32,200 married filing jointly.
The IRS's flat amount per business mile, used in place of actual car costs: 72.5 cents for January to June 2026 and 76 cents from July 1, 2026.
A range of taxable income taxed at one rate; federal rates run from 10% to 37%, and each rate applies only to the income inside its own range.
A three-digit IRS code for each job on the No Tax on Tips occupation list, like 102 for wait staff. It shows in W-2 box 14b starting with 2026.
Income tax your employer takes from each paycheck and sends to the IRS, in an amount set by the Form W-4 you give your employer.
The share of job offers, such as rides or deliveries, that a gig worker accepts out of all the offers an app sent over a recent period.
The time a gig worker spends logged in to a driving or delivery app, counting time waiting for offers as well as time spent on rides or deliveries.
A self-employed worker whose client controls only the result of the work, not how it's done, so no tax is withheld and you owe self-employment tax.
A strict state test of worker status: you're an employee unless the business proves all three parts, A (no control), B (outside work) and C (own trade).
The federal agency whose Wage and Hour Division enforces the FLSA and takes confidential complaints about unpaid wages, overtime and tips.
The main federal wage law: it sets the $7.25 minimum wage, overtime after 40 hours a week, the tip credit rules and the employer's pay records.
When a business treats a worker who is legally an employee as an independent contractor, which can cost the worker minimum wage, overtime and tax savings.
Pay of at least 1.5 times your regular rate for hours over 40 in a workweek, which federal law requires for non-exempt workers, tipped ones included.
A common name for an employer not paying the wages or tips you're owed, such as unpaid overtime, a misused tip credit or managers taking tips.
Cashout