CPAs certainly know this, but sometimes taxpayers may not understand: tips are income and have to be reported. The IRS is reminding everyone with a recent Tax Tip on the subject.
Workers who get tips from customers should be aware of the following, according to the IRS:
- Tips are taxable. You must pay federal income tax on any tips. Even non-cash tips, such as tickets, passes or other items of value, are subject to income tax.