Tip Income

AAA

DEFINITION of 'Tip Income'

Income that a service professional earns that is not part of a regular wage. Tip income can come from a gratuity left by a customer at a restaurant, money received by a porter for carrying luggage to a hotel room, or from other activities that are not covered by the employer. Tip income can be considered a secondary form of income.

INVESTOPEDIA EXPLAINS 'Tip Income'

Some businesses, such as restaurants, assume that employees will earn tips and will thus provide a lower hourly wage rate. If an individual collects tips over a given amount during a calendar month, it must be reported to the employer and to the government, since taxes have not been withheld like they are for normal income.

RELATED TERMS
  1. IRS Publication 1244: Employee's ...

    A document published by the Internal Revenue Service (IRS) that ...
  2. Form 4070: Employee's Report Of ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. IRS Publication 531

    A document published by the Internal Revenue Service (IRS) that ...
  4. Gambling Income

    Any income that is the result of games of chance or wagers on ...
  5. Personal Income

    Total compensation received by an individual. Personal income ...
  6. Exempt Income

    Certain types or amounts of income not subject to federal income ...
Related Articles
  1. Taxes

    Should You File An Early Tax Return?

    When it comes to filing your taxes, it can often pay to wait until the deadline.
  2. Taxes

    Personal Income Tax Guide

    If the sight of your W-4 has you in the doldrums, read on to learn how to beat the tax blues.
  3. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  4. Retirement

    Pages From The Bad CEO Playbook

    Excess compensation, golden parachutes, tunneling and IPO spinning make these bad executives even worse.
  5. Retirement

    5 Lesser-Known Retirement And Benefit Plans

    These plans aren't widely used, but they fill a specific niche for employees in certain situations.
  6. Insurance

    Trending Toward Asset-Based Management

    Will charging fees instead of commission increase your client base?
  7. Investing Basics

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
  8. Retirement

    Job Hunting: Higher Pay Vs. Better Benefits

    Focusing on salary may be a mistake. Find out which benefits have the highest long-run payoff.
  9. Personal Finance

    America's Compensation Gap Shows No Signs Of Slowing

    The gap between the rich and the poor and middle classes is rapidly increasing in America. Historically this is not a good sign, as a strong middle class has been the backbone of the U.S. economy ...
  10. Home & Auto

    Cut Commissions With "For Sale By Owner" Sales

    It takes a lot more work, but selling your home without a realtor can have benefits.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center