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 during their course of business. 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.

Key Takeaways

  • IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer is an Internal Revenue Service (IRS) document that describes how employees should keep track of and report any income earned from tips.
  • As defined by the IRS, tips include those received by either cash, debit or credit cards, or an employee tip-sharing system.
  • IRS Publication 1244 includes form 4070A, which is voluntary, and form 4070, which is mandatory to fill out and return to the IRS.
  • 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.
  • Tips are treated the same as wages and other forms of income and must always be reported to the IRS. Failing to do so counts as tax evasion and is punishable by law.

Understanding 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 4070A 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 a 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.

Tips are always treated as wages or as other forms of income and failing to report them counts as tax evasion. Cash tips can be difficult to trace, but credit and debit card tips are recorded and can be easily identified by the IRS.

IRS Publication 1244: Employee's Daily Record of Tips and Report to Employer is not to be confused with the IRS Section 1244 stock. Section 1244 stock outlines the tax treatment applied to restricted stock, which allows for stock losses to be deducted as ordinary losses as opposed to capital losses.

Employers' Responsibilities to the 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 equal to or exceed 8% of the total revenue for that period. If it does not equal 8% 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% of total sales for that period. If employers wish to request a lower rate than 8%, they can submit an application to the IRS for rates as low as 2%, which will be granted on a case-by-case basis.