CashoutGlossary / Cash tip
Cash tip
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 cash tip is paper money or coins a customer hands you or leaves on the table, or that a coworker passes to you. All tips are income, so cash tips are taxed the same as card tips. The difference is that your employer only knows about them if you tell them.
- If your tips from one job total $20 or more in a month, report them to your employer by the 10th of the next month. Your employer then withholds income tax, Social Security and Medicare on them.
- Keep a daily record of cash you get from customers and coworkers and what you pay out to others. The IRS says the record is how you report accurately and prove your income if questioned.
- Tips you didn't report to your employer go on Form 4137, where you pay the Social Security and Medicare tax yourself. Not reporting can also bring a penalty of 50 percent of that tax.
Watch the wording on tax forms. On the 2026 W-2, box 12 code TP shows the cash tips you reported, and the form says cash tips there include tips received in cash, charged, or through a tip-sharing arrangement. So card tips belong in that number too.
The common mistake is skipping small cash nights. Tips have to be on your W-2, a 1099 or Form 4137 to count for No Tax on Tips, so unreported cash can cost you the deduction on top of the payroll tax.
Related terms
Credit card tip · Reported tips · Form 4137 · Tip · Allocated tips
