5 tax tips for tip recipients, including Oscars pizza delivery guy

March 8, 2014

Yes, that was a real pizza delivery guy at the Oscars last Sunday.

Yes, host Ellen DeGeneres did pass Pharrell’s hat, collecting real money from Hollywood’s elite for a tip.

Ellen got about $600 from Kevin Spacey, Brad Pitt, Chiwetel Ejiofor et al and she added around $400 so she could present Edgar Martirosyan with an even one grand tip when he appeared on her talk show last week.

 

And yes, that $1,000 tip is taxable income.

Martirosyan probably already knows that since he’s more than just a delivery guy. He and his brother own Big Mama’s and Papa’s Pizzeria in Los Angeles.

All tips are taxable: But as a reminder to all folks who get tips, from deliverymen to hairdressers to cab drivers, today’s Daily Tax Tip offers five tips for tip recipients.

  1. All tips, large or small, are taxable. This includes not just generous gratuities like Martirosyan got, but also the minimal amounts from cheaper customers. Count tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  2. All types of tips are taxable. Count not just the cash amounts, but also the value of non-cash tips you receive.
  3. Report tips to your employer. When you receive $20 or more in tips in any one month from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit and credit card tips, not the non-cash tips, you receive. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
  4. Keep a daily log of tips. Use Internal Revenue Service Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.
  5. When it comes to reporting those tips on your annual tax return, include the amount with your wages. That’s line 7 on Form 1040; line 7 on Form 1040A; line 1 on Form 1040EZ; line 8 on  Form 1040NR; and line 3 on Form 1040NR-EZ. Any tips you reported to your employer are included in the wages shown in box 1 of your Form W-2. Add to the amount in box 1 only the tips you did not report to your employer in those months when you didn’t get at least $20.

IRS Publication 531, Reporting Tip Income, has more on tip reporting.

I know it’s no fun paying taxes, but at least it means you’re making money. Here’s hoping your gratuities are great.

You also might find these items of interest:

 

 

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