What is 'IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer'

IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer, is a document published by the Internal Revenue Service (IRS), which outlines  how employees are supposed to keep track of and report income earned from tips. Tip income can be in any form, whether it be cash, credit or debit card adjustments to a bill or through a tip sharing system between colleagues. 

BREAKING DOWN 'IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer'

IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer also includes both Form 4070 and Form 4070A, which are documents that employees must use to report income earned from tips. Form 4070 is not mandatory for employees to fill out. It is instead for voluntary use, but workers might find it a useful tool for keeping track of the tips they earn each day. 

Form 4070, on the other hand, is mandatory for workers who earn more than $20 to submit to their employer, or to submit similar statement with all pertinent information. Form 4070 must be submitted to employers each month, and requests the following information: employee’s name, address, social security number, the month in question, and the total tips received and paid out to colleagues. Employees must sign and date form 4070 and submit it to their employer each month before the 10th day of the month following the month that you receive the reported tips. If the 10th day of a particular month is a Saturday, Sunday or a federal holiday, taxpayers should report tip income by the next day that is not a Saturday, Sunday or federal holiday.

Employers' Responsibilities to IRS

Employers are responsible for collecting payroll taxes, like those for Medicare, Medicaid, and Social Security. Using the forms 4070 submitted to them by their employees, an employer must calculate the payroll tax owed and collect that from their employees, either through their paycheck or through other funds provided by the employee.

Employers also must determine whether the total tips reported equals or exceeds 8 percent of the total revenue for that period. If it does not equal 8 percent of the employer’s total revenue for that period, the employer is required to give to employees the difference between the actual tip income reported and 8 percent of total sales for that period. If employers wish to request a lower rate than 8 percent, they can submit an application to the IRS for rates as low as 2 percent, which will be granted on a case-by-case basis.

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