Publication 17
taxmap/pub17/p17-030.htm#en_us_publink1000171391If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. They are not included in box 1 with your wages and reported tips. If box 8 is blank, this discussion does not apply to
you.
taxmap/pub17/p17-030.htm#en_us_publink1000171392These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Your employer will have done this only if:
- You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees,
and
- The tips you reported to your employer were less than your share of 8% of food and drink
sales.
No income, social security, or Medicare taxes are withheld on allocated tips.
taxmap/pub17/p17-030.htm#en_us_publink1000171393The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. For information about the exact allocation method used, ask your employer.
taxmap/pub17/p17-030.htm#en_us_publink1000265580You must report all tips you received in 2012 on your tax return, including both cash tips and noncash tips. Any tips you reported to your employer for 2012 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. This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated
figures.
taxmap/pub17/p17-030.htm#en_us_publink1000265582Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. (You cannot file Form 1040A or Form 1040EZ when you have allocated tips.)