All tips you receive directly, through your employer and under a tip-splitting or tip-pooling are income. If you have tips income, you must keep a proper record of tips, report tips to your employer and report tips income on your tax return.
1. Keep a daily tip record. You can either maintain your personal tip diary, or keep copies of documents that show your tips, such as restaurant bills and credit card charge slips.
2. Report tips to your employer. You must report tips (amounting to $20 or more in a month) to your employer each month by the 10th of the next month so that your employer can withhold FICA taxes. If your employer does not give you any other way to report tips, you can use Form 4070. Fill in the information and give it to your employer. To get a 1-year supply of the form, ask your employer for Publication 1244 or contact IRS.
3. Report all your tips on your income tax return. Report your tips with your wages on line 1 of Form 1040EZ or line 7 of Form 1040A or Form 1040. You must report all tips you received in 2008 on your tax return, including both cash tips and non cash tips. Any tips you reported to your employer for 2008 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.
You must keep all the records as per the federal law.
1. For assessment of tax you owe, this generally is 3 years from the date you filed the return or the due date of the return, which ever is later.
2. For filing a claim for credit or refund, this generally is 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.
3. If you did not report income that you should have reported on your return, and it is more than 25% of the income shown on the return, the period of limitations does not run out until 6 years after you filed the return.
4. If a return is false or fraudulent with intent to evade tax, or if no return is filed, an action can generally be brought at any time
5. You may need to keep records relating to the basis of property longer than the period of limitations. Keep those records as long as they are important in figuring the basis of the original or replacement property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.
The clause "if the return is false or fraudulent...," may mean that you should keep record for all your life.
What If I Have Incomplete Records?
If you do not have complete records to prove an element of an expense, then you must prove the element with:
*Your own written or oral statement, containing specific information about the element, and
*Other supporting evidence that is sufficient to establish the element.
Destroyed records. If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Reasons beyond your control include fire, flood, and other casualty. Go through your bank statements, canceled checks, credit card statements and other records to collect as much information as you can. Get a copy of police report with you.
Excess Social Security Taxes Withheld
The Federal Insurance Contributions Act (FICA) provides for a federal system of old-age, survivors, disability, and hospital insurance. The FICA requires that the employer withhold social security tax at 6.2% and Medicare tax at 1.45% from the wages of the employees. For the year 2008 the social security tax is deducted from the first $102,000 of the wages while Medicare tax is deducted from the entire wages.If you, or your spouse if filing joint return, had more than one employer for 2008 and total wages of more than $102,000 (or $97,500 for 2007), too much social security tax may have been withheld. You can take a credit on this line for refund on line 67 of Form 1040 for the amount withheld in excess of $6324 for 2008 (or $6045 for 2007). But if any one employer withheld more than $6324, you cannot claim the excess on your return. The employer should adjust the tax for you. If the employer does not adjust the over collection amount, you can file a claim for refund using Form 843. The Form 843 is filed separate from the tax return.
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009
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