How to track your tips as a server or bartender
Short answer: Write down five things after every shift: the date, your hours, cash tips, card tips, and what you tipped out (and to whom). Keep it in one place, a notebook, a spreadsheet or an app, and total it weekly. That log is what the IRS calls a daily tip record, and it is also the only way to know your real hourly pay.
Why bother tracking tips at all
Three reasons, in order of how much money they involve.
You cannot know what you earn without it. A server's pay is base wage plus tips minus tip-outs, and it changes every shift. Two servers on the same $2.13 cash wage can have very different real hourly rates depending on section, shift and tip-out rules. Without a log, you are guessing.
The IRS expects a daily record. IRS Publication 531 says employees who receive tips must keep a daily record. Employers need your monthly report of tips (cash, check and card) by the 10th of the following month whenever your tips from that job reach $20 in a month (IRS tip recordkeeping page).
The tip deduction (tax years 2025 through 2028) runs on records. The deduction for qualified tips is claimed on Schedule 1-A and depends on tips being reported on your W-2 or on Form 4137 (IRS Tax Tip 2026-06). Your own log is how you check the numbers your employer reports. See our guide on what tip records to keep for the no-tax-on-tips deduction.
What to record every shift
The list below follows what Publication 531 says a daily tip record should contain, plus two items you need for your own math.
| Item | Why |
|---|---|
| Date | Required in the IRS record; lets you total by month and year |
| Hours worked (clock in, clock out) | Needed for real hourly; not an IRS item |
| Cash tips received | IRS item |
| Credit and debit card tips your employer paid you | IRS item |
| Value of noncash tips (tickets, gifts) | IRS item; reported on your return, not to your employer |
| Tips paid out to other employees, and their names | IRS item; you report only the tips you keep |
| Sales (optional) | Needed if your tip-outs are a percentage of sales |
Two details that trip people up:
- Tip-outs reduce what you report. Publication 531 says not to report to your employer the portion of tips you pass to other employees. So if you made $200 and tipped out $30, you report $170. The record of the $30 and who got it is what supports that.
- Tips you receive from a pool count as yours. If you are a busser or bartender receiving tip-outs, those are your tips and go in your record.
Pick one method and stick with it
Paper. A small notebook in your apron works. The old IRS Form 4070A was a printed daily log; the IRS now lists Forms 4070 and 4070A as historical (Publication 531), but its columns are still a good model: date, tips received directly from customers and other employees, card tips, tips paid out, and the names of the employees you paid.
Spreadsheet. One row per shift, columns as in the table above, a formula for tips kept = cash + card - tip-outs and another for real hourly = (base wage x hours + tips kept) / hours. Add a monthly total row so you have the figure to report to your employer.
App. An app is only better than a spreadsheet if entry is faster and the totals come out in the shape you need at tax time (monthly totals for employer reports, a yearly summary for your return). Whatever you use, make sure you can export your data; a log you cannot get out of the app is not a record.
The method matters less than the habit. Log before you leave the building, not the next morning.
Find your real hourly
Real hourly is the number that tells you whether a shift, a section or a job is worth it.
real hourly = (base wage x hours + cash tips + card tips - tip-outs) / hours
Example: 6 hours at a $2.13 cash wage, $180 card tips, $65 cash tips, $30 tipped out.
- Wages: 6 x $2.13 = $12.78
- Tips kept: $180 + $65 - $30 = $215.00
- Total: $227.78
- Real hourly: $227.78 / 6 = $37.96
Under federal law, if an employer takes a tip credit and your cash wage plus tips comes to less than the federal minimum wage ($7.25 an hour) in a workweek, the employer must make up the difference (DOL Fact Sheet 15). Many states set a higher minimum. A log is how you can check this.
Do a weekly and monthly close
- Weekly (2 minutes): total tips kept and hours; note your average real hourly. Patterns show up fast: which nights, which sections, which tip-out rules eat your income.
- Monthly (5 minutes): total the tips you kept for each job. That is the figure to report to your employer by the 10th if it is $20 or more (IRS). Compare it with what your employer has on your pay stub.
- Yearly (10 minutes): total everything, compare with box 7 (social security tips) on your W-2, and keep the log with your tax papers.
A note on service charges
An automatic 18% on large parties or a banquet service fee is a service charge, not a tip, even if your employer pays it to you. The IRS treats it as wages (IRS), and it does not count as a qualified tip for the tip deduction (TD 10044, final regulations). Record it separately so your tip totals stay clean.
If you want the log done for you
Goodhands Tip Tracker is a free Android app that takes one typed line per shift ("worked 5 to 11, 180 card, 65 cash, tipped out 30"), applies your tip-out rules, and keeps the daily record, monthly totals and a yearly summary as PDF or CSV. Your data stays on your phone. It is one option; a notebook that you actually fill in beats any app that you do not.
FAQ
Do I have to track cash tips if they are small?
Yes, for your own record. You only skip reporting a month to your employer when your total tips from that job that month are under $20 (IRS). All tips, including those months, still go on your tax return.
Should I log tips before or after tip-out?
Log both: the gross you received and the amount you tipped out, with names. You report the net to your employer, and the IRS record format asks for the tip-outs separately.
How long should I keep tip records?
The IRS tells taxpayers to keep records that support items on a return until the period of limitations for that return runs out, generally three years from filing (IRS, How long should I keep records). Keeping the yearly summary longer costs nothing.
Is a photo of my tip-out slip enough?
A photo is useful backup, but the IRS daily record asks for date, amounts and the names of people you tipped out. Write those down; keep the photo too.
This guide describes record-keeping and quotes public IRS and DOL material. It is not tax or legal advice. Last checked: 2026-10-29.
Track your tips in one line per shift.Goodhands Tip Tracker, Android, early access.
See the appGuides describe public information and are not tax advice. Goodhands is not affiliated with the IRS.