IRS clarifies tip jar tax treatment

Posted 5/1/2018

The IRS has released new guidance on the tax treatment of cash left in tip jars. In Chief Counsel Advice 20186010, the agency clarifies that cash amounts constituted tips that are subject to IRS notice and demand procedures. Tips received by employees in the course of employment are considered remuneration that has been paid by the employer for FICA tax purposes. The remuneration is generally deemed to be paid when a written statement including the tips is furnished to the employer by employees. Otherwise, tips are treated as being paid on the date on which IRS issues a notice and demand for taxes to the employer.

CPA Practice Advisor Forbes