Form 4070: Are Tips Taxable & How to Report Tips on Tax Return

4070 Form Explained 

If you’re a tipped worker who’s wondering how to report tips on tax return, we’ve got you covered. In this piece, we’ll cover the specific document you’ll need for reporting this type of income — and provide recommendations on how to sort it out. Stay tuned.

Are Tips Taxable?

The answer to this question is a definite yes. If you earn over twenty dollars in tips on a monthly basis, reporting them is a must-do — irrespective of whether they’re in cash or not. Failing to do it may lead to IRS-imposed penalties. The right way to handle taxes on tips is via IRS form 4070. 

Are Cash Tips Reported to the IRS?

Not exactly. The primary recipient is your boss. And that’s exactly what you need the 4070 form for. Fill out the form and share it with your employer. Your boss utilizes the form for pinpointing the tax amount to withhold from your salary. With regard to your non-cash tips, no need to involve your employer in reporting this time. You must include them straight on your tax return. 

Tips fall into the category of income. They come in the form of cash left by clients, gratuities that clients add to payment card charges, tips from your boss, as well as tips shared by other staff members. 

Document Your Tips & Report Monthly

Tax authorities want you to report your cash tips to your boss on a monthly basis if they exceed $20. Form 4070 is exactly what you need to get the reporting going. Does your boss want you to get the reporting going more frequently? That’s normal, and they’re officially allowed to do that. Also, they can ask you to send them this form in a digital format, which is also normal (and very convenient).

Submitting the form by the tenth of the month after you were tipped is the general rule. Say, you earned $80 in tips in March. Under these circumstances, reporting the amount by April 10 is the right thing to do. 

How to Fill Out 4070 Form 

The tax form 4070 is a two-pager, with only the first page being fillable. The second page is for information purposes only. 

Here’s what you’ll need to indicate as you progress through the file:

1. Your ID details and contacts.

2. Your social security number.

3. Your boss’s ID details and contacts.

4. When you were tipped exactly.

5. The total amount received.

6. The necessary signatures.

When you’re through with the tip reporting form, feel free to forward it to your boss. Your boss will then submit it to the tax authorities. Don’t forget that if you’re facing any difficulties completing the form, you can always turn to professional help. The investment will definitely pay off.

If you’re planning to fill out and send the form digitally, you’re about to make the right choice. Digital document management contributes to freeing up heaps of your time and automates your administrative affairs. Make the most of PDFLiner — a top-notch online document editor that is sure to help you digitize your document flow.

What Happens If You Don’t Report Tips

Failed to cope with this important task? No worries. There’s also the option of reporting your tips on your tax return. Bear in mind that this will require calculating your Social Security and Hospital Insurance tax. Form 4137 is what you’ll need here.

Aside from paying these taxes on unreported tip income, the IRS could also severely penalize you for the unreported earnings. Therefore, informing your employer about your tips is in your best interest. This will allow them to withhold sufficient amounts for Social Security and Medicare. All this will prevent you from owing the IRS a hefty amount upon filing your return. If you fail to report your taxes on a regular basis, this may ultimately lead to having you audited by the IRS. And you don’t want that to happen.

Long story short, better safe than sorry. With that said, equip yourself and fill out that form online without having to scan or print anything out, and hand it to your employer whenever necessary.

Bottom Line

Failure to get to grips with and follow tax reporting rules leads to highly undesirable consequences. But tax rules sometimes get challenging to grasp. And tax docs are not always a cakewalk to fill out. With that said, ensure you equip yourself with the best and most time-saving tools for managing your taxes, seek professional advice whenever necessary, and enjoy peace of mind.

Author Profile

Adam Regan
Adam Regan
Deputy Editor

Features and account management. 3 years media experience. Previously covered features for online and print editions.


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