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How to report cash tips to your employer

Updated October 29, 2026 · 6 min read

Short answer: Yes. If you get $20 or more in tips from one job in a calendar month, give your employer a report of those tips by the 10th of the next month. Report cash, check, debit and credit card tips you keep, after tip-outs. Noncash tips go on your tax return instead.

What is the $20 rule?

The $20 rule is the monthly cutoff for telling your employer about your tips. Publication 531 says that if your total tips for any one month from any one job are less than $20, you do not report them to that employer (IRS Publication 531). The IRS tip page says the same, counting tips "with respect to that employer" for the calendar month (IRS, Tip recordkeeping and reporting).

Two things to notice.

• The test is per job and per month. If you pick up a few brunch shifts at a second place and make $15 there in a month, you owe that employer no report, even if your main job put you well over $20.
• Skipping the report to your employer does not mean you owe no tax. Tips under $20 are still income. Publication 531 lists cash and charge tips that totaled less than $20 for any month among the tips to add to the amount in box 1 of your Form W-2.

Which tips do I report to my employer?

Publication 531 says to report to your employer only cash, check, and debit and credit card tips you receive. The IRS tip page defines cash tips as those paid in cash or a cash medium of exchange, including checks, credit cards, debit cards and gift cards.

Source: IRS Publication 531. On noncash tips, Publication 531 says: don't report their value to your employer, but you must report them on your tax return.

Do I report tips before or after tip-out?

After. Publication 531 says that if you take part in a tip-splitting or tip-pooling arrangement, you report only the tips you receive and keep. If you tipped out part of what you received, that part is not in your figure. The person who received your tip-out reports it as part of their own tips.

Your daily record is what supports the smaller number. Publication 531 asks you to write down the amount you paid out to other employees and their names.

When is the report due?

By the 10th day of the month after the month you received the tips. Tips from August are due September 10 (IRS tip page). If the 10th falls on a Saturday, Sunday or legal holiday, give the report by the next day that is not one of those (IRS Publication 531). If your job ends during the month, you can report your tips when it ends (same source).

What does the report contain?

Publication 531 says that if your employer does not give you any other way to report your tips, you can give your employer a statement with:

• your name, address and Social Security number;
• your employer's name and address, and the business name if it is different;
• the month (or shorter period) the tips were received;
• the total tips for that period.

Sign and date it and keep a copy. Your employer can also have you send tip statements electronically. If your restaurant has you declare tips in the POS at clock-out, that is your employer's own method, and the written statement is the fallback. Forms 4070 and 4070A were made historical (IRS Publication 531). For what to write in your own daily record, see the daily tip record template guide.

What if I did not report my tips?

Use Form 4137. The IRS says an employee who received tips and did not report them to the employer must use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report them as additional wages and pay the employee's share of Social Security and Medicare tax (IRS tip page). The IRS form page says to use it only to figure the Social Security and Medicare tax owed on tips you did not report to your employer (IRS, About Form 4137). You attach it to your federal income tax return, per Publication 531.

What is the penalty?

Publication 531 states that if you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the Social Security, Medicare, Additional Medicare or railroad retirement taxes you owe on the unreported tips. It is in addition to the taxes you owe. You can avoid the penalty by showing reasonable cause for not reporting, by attaching a statement to your return that explains why (IRS Publication 531).

A simple monthly routine

1. During the month, write down each shift's cash tips, card tips and tip-outs.
2. In the last days of the month, total the tips you kept from each job.
3. If a job's total is $20 or more, give your employer the report by the 10th of the next month.
4. Keep a copy of the report with your daily record.

Goodhands Tip Tracker is a free Android app that keeps a shift log and monthly totals you can read off when you write your report. It is a notebook replacement, not a tax tool (home page).

FAQ

Do I report cash tips if they are under $20 for the month?

Not to your employer. Publication 531 says tips under $20 in a month from one job are not reported to that employer, but they are still income on your return.

Do card tips count toward the $20?

Yes. The IRS counts debit and credit card tips as tips to report to your employer, and the $20 test uses your total tips from that employer for the month (IRS tip page).

Do I include the tips I gave to the busser or bartender?

No. Report only the tips you receive and keep. Record the amount you paid out and who got it in your daily record (IRS Publication 531).

Do I have to use Form 4070?

No. The IRS made Forms 4070 and 4070A historical. A signed statement or your employer's own method is fine (IRS Publication 531).

What are allocated tips on my W-2?

They are shown separately in box 8 of your W-2 and are not included in box 1 with your wages and reported tips (IRS Publication 531). Form 4137 also covers allocated tips you must report as income (IRS, About Form 4137).

This guide describes public IRS material. It is not tax or legal advice, and your situation may differ. For decisions about your return, use the IRS instructions or a tax professional. Last checked: 2026-10-29.

Guides describe public information and are not tax advice. Goodhands is not affiliated with the IRS.