Guides / Reporting Tips to Your Employer

By NorseHorse. Updated October 16, 2026. General information, not tax advice; confirm your situation with a tax professional.

If you get $20 or more in tips in a month at one job, you have to report them to your employer by the 10th of the next month. You report the cash, check and card tips you keep, including what you get from a tip pool, and leave out what you tip out to others. Starting with 2026, that report is also the number your employer puts in W-2 box 12 with code TP, which is where the tips deduction starts.

The $20 rule

The rule is per job and per month. If your tips from one job total less than $20 for a month, you don't report that month to that employer. Those tips are still income. They aren't subject to Social Security and Medicare tax, but they go on your return, and Form 4137 has a line for them.

Two jobs are counted separately. $15 at a coffee shop and $15 at a bar in the same month means nothing to report at either one.

The deadline: the 10th of the next month

Give your employer each month's report by the 10th of the following month. If the 10th falls on a Saturday, Sunday or legal holiday, the deadline moves to the next day that isn't one. January 10, 2027 is a Sunday, so your December 2026 report is due Monday, January 11, 2027. One report can't cover more than one calendar month, but it can cover a shorter period, so a POS that collects your tips every shift or every pay period works.

Form 4070, 4070A and what replaced them

Form 4070 (the monthly report to your employer) and Form 4070A (the daily tip record) used to come bundled in IRS Publication 1244. The IRS has made both forms historical, and starting in 2024 it stopped publishing Publication 1244. You don't need the form. A written statement works if it has:

• Your name, address and Social Security number
• Your employer's name, address and business name (if different)
• The month, or the dates of a shorter period, the report covers
• The total tips you're required to report for that period
• Your signature and the date

Keep a copy. Your employer can also have you report electronically.

What to include and what to leave out

If you're in a tip pool or tip-splitting arrangement, report only what you receive and keep. Card tips belong in your report even though the POS already recorded them. Service charges paid to you are wages, not tips, so they're already in your pay. Noncash tips are still income on your return; you just don't report them to your employer.

Worked example

In March you collect $1,400 in card tips and $600 in cash, and you get $150 from the bar's tip share. You tip out $200 to the bussers. Your March report is $1,400 + $600 + $150 minus $200, which is $1,950, due by April 10.

When your paycheck is too small to cover the tax

Reported tips carry Social Security and Medicare tax, and your employer also withholds income tax on them. A server earning a low hourly base can easily owe more tax on tips than the paycheck holds. When that happens, your employer applies your pay in this order:

1. All taxes on your regular pay
2. Social Security and Medicare taxes on your reported tips
3. Federal, state and local income taxes on your reported tips

Whatever is left unpaid can come out of your next paycheck, and you can give your employer money to cover it until the end of the calendar year. Social Security and Medicare that never get collected show up on your W-2 in box 12, code A (Social Security) and code B (Medicare). That is tax you still owe. It goes on Schedule 2 of your Form 1040 (line 13 on the 2025 version), and you pay it when you file. Plenty of servers get surprised by this in April because nobody pointed at box 12.

Keep a daily record

The IRS says you must keep a daily tip record so you can report accurately to your employer, report accurately on your return, and prove your tip income if your return is questioned. Each workday, write down the date and:

• Cash tips from customers or other employees
• Card tips your employer pays you
• The value of any noncash tips
• Tips you paid out to other employees through a pool, split or other arrangement

Copies of restaurant bills and card slips count as records too. If you use your employer's electronic system, you must get and keep a paper copy. Hours and sales are worth logging as well, since they help you check a tip allocation and a tip-out. Cashout logs each shift's tips, tip-outs and hours, and the tip log template works if you'd rather use a spreadsheet. Write it down the night of the shift. A log made months later is much harder to defend.

Why the report matters more in 2026

Your employer reports tips to Social Security, which affects your retirement and disability benefits. In 2026 it also drives the federal tips deduction. New W-2 box 12, code TP shows the total cash tips you reported to your employer, and box 14b shows your Treasury Tipped Occupation Code. The 2026 draft Schedule 1-A (the form where you claim the deduction) takes qualified tips from that box 12 code TP amount.

The final regulations say an employee's tips have to be reported to the employer, or reported by you on Form 4137, to count for the deduction. Tips you never report anywhere get nothing. Tips you skip with your employer but report on Form 4137 can still count, but you'll pay the Social Security and Medicare tax yourself and may owe a 50 percent penalty on it. See Form 4137: paying tax on tips you didn't report and W-2 box 12 code TP. The No Tax on Tips guide covers who qualifies.

Common questions

Do I have to report card tips my employer already has?

Yes. The IRS says to report cash, check, and debit and credit card tips. In practice your POS report often fills in the card amount and you add the cash.

What if I missed the 10th?

Report as soon as you can. The penalty in the tax code applies when you don't report on the date and in the manner required, unless you had reasonable cause. Tips you never reported to your employer during the year go on Form 4137 with your return.

Is a mandatory 20 percent gratuity a tip?

No. A service charge your employer adds to the bill is wages, not a tip. Don't put it in your tip report or your tip diary, and it doesn't count as a qualified tip for the deduction.

Do tips from the tip pool count as my tips?

Yes. You report tips you get from other employees. The person who paid into the pool reports only what they kept.

What if my employer allocates tips to me anyway?

Large restaurants can put allocated tips in W-2 box 8 when reported tips run low. Tip allocation and Form 8027 explains how that works and what to do with box 8.

Track it all with Cashout. Shifts, tips, unpaid breaks, taxes, and mileage, logged in seconds. iPhone · Android