Tips, Gigs, and Taxes: A Fun Guide to Reporting Your Extra Income
Heads up, tax-savvy friends! Did you know that all income is taxable, including that extra cash you make from your side hustle or the tips you earn at work? That’s right, Uncle Sam wants his share, but don’t worry, we’ll break it down for you in a way that’s as fun as taxes can be!
First, let’s chat about the gig economy. You know that thing where you hustle for cash by driving people around, renting out your place, or selling your handmade crafts online. Even if it’s just part-time or temporary, you’ve got to report that income on your tax return. And it doesn’t matter if you were paid in cash, goods, or digital assets. If you’re wondering where to start, head over to the gig economy tax center on IRS.gov for more info.
Now, let’s talk tips! For those of you in the service industry, like restaurants, salons, and hotels, tips are a big part of your income. And guess what? They’re taxable, too! Here’s the scoop on reporting tips:
- Cash tips: Those sweet, sweet dollar bills (or electronic tips) you get from customers, plus any tips shared among employees, need to be reported to your employer. They’ll include them on your Form W-2, Wage and Tax Statement.
- Noncash tips: Did a generous customer gift you ticket or some other non-cash item? You don’t need to tell your employer, but you do need to report the value on your tax return.
- Unreported cash tips: If you didn’t report some cash tips to your employer, you’ll need to file Form 4137, Social Security and Medicare Tax on Unreported Tip Income. This also covers the employee share of Social Security and Medicare tax owed on those tips.
Keep in mind, you don’t have to report tips less than $20 per month per employer. But for anything more, report those tips to your employer by the 10th of the month following when you received them. You can use Form 4070, Employee’s Report of Tips to Employer, or whatever system your employer has set up.
For more information on tip recordkeeping and reporting, visit the Tip Recordkeeping and Reporting page on IRS.gov.
There you have it, folks! The lowdown on reporting gig economy and tip income. So go forth, earn that extra cash, and remember to keep Uncle Sam in the loop. Happy tax filing!
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**