IRS Form 4070 is the monthly statement a tipped employee gives to their employer to report cash and charge tips. You owe your employer a report anytime you receive $20 or more in tips in a calendar month from that job, and the report is due by the 10th of the following month.1Internal Revenue Service. Form 4070 (Rev. August 2005) – Employee’s Report of Tips to Employer The form goes to payroll, not to the IRS, so your employer can withhold the right income tax, Social Security, and Medicare amounts. Skip it and the IRS can add a penalty equal to 50% of the FICA taxes you should have paid on the unreported tips.2Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income
Who Has to File and What Counts as a Tip
The $20 threshold applies per employer, per calendar month. If you receive less than $20 in tips in a month from a single employer, you owe that employer no report for the month. Once you hit $20, every dollar of tips from that job for the month is reportable, not just the amount above $20.1Internal Revenue Service. Form 4070 (Rev. August 2005) – Employee’s Report of Tips to Employer Two tipped jobs mean two separate evaluations.
Reportable tips include cash left directly by customers, tips added to credit or debit card charges, and your share of any tip pool or tip-splitting arrangement. Amounts you paid out to coworkers through those arrangements come off your total, so you’re reporting net tips received.3Internal Revenue Service. Publication 531, Reporting Tip Income
Two things do not go on Form 4070. Noncash tips like tickets, passes, or gift cards are not reported to your employer at all; they go directly on your tax return.4Internal Revenue Service. Tip Income Is Taxable and Must Be Reported Automatic gratuities — the fixed 18% or 20% a restaurant adds to a large-party bill — are service charges rather than tips, even when the receipt labels them a gratuity. Your employer runs those through regular payroll as wages.5Internal Revenue Service. Tips Versus Service Charges: How to Report
The IRS uses four tests to separate the two. A payment is a tip only when the customer pays it voluntarily, sets the amount without a policy dictating it, isn’t compelled by the business, and decides who gets it. Miss any one of those and it’s a service charge.6Internal Revenue Service. Revenue Ruling 2012-18 – Tips Included for Both Employee and Employer Taxes A customer writing an amount on the tip line qualifies as a tip. A mandatory 18% added to a party of six does not, regardless of where it prints on the check.
What Goes on the Form and How to Submit It
Form 4070 asks for a short list of information. You put down your name, address, and Social Security number; your employer’s name and address; the month covered by the report; your total cash tips and total charge tips received for that month, less any tip-outs paid to other employees; and your signature and date.1Internal Revenue Service. Form 4070 (Rev. August 2005) – Employee’s Report of Tips to Employer
You aren’t required to use the IRS form itself. Any written or electronic statement with the same information qualifies. Many employers build tip entry into their timekeeping or payroll software, and using that in-house system satisfies your obligation. The requirement is the same content, however it’s delivered.
The deadline is the 10th day of the month after the tips were earned. Tips from March are due to your employer by April 10. If the 10th lands on a Saturday, Sunday, or legal holiday, the deadline moves to the next business day.1Internal Revenue Service. Form 4070 (Rev. August 2005) – Employee’s Report of Tips to Employer Keep a copy of every submission — a photocopy of the paper form or a screenshot of the electronic confirmation. If a question comes up months later, that copy is what settles it.
The Daily Record Behind the Form
Accurate monthly reports come out of a daily log. The IRS recommends recording, for each workday: the date, cash tips received directly from customers or other employees, tips from credit and debit card charges paid to you by the employer, amounts you paid out to coworkers through tip pools or splitting (with their names), and the value of any noncash tips. Include your own name, your employer’s name, and the business name if it differs.3Internal Revenue Service. Publication 531, Reporting Tip Income
Form 4070-A, inside IRS Publication 1244, is a pre-formatted daily log built for this. A notebook, a spreadsheet, or a tip-tracking app works just as well as long as it captures the same fields. What matters is that the entries are contemporaneous. Reconstructing a month of tips from memory is where mistakes creep in, and it’s the first thing the IRS will question in an audit.
Separating cash tips from charge tips in the log makes reconciliation simpler because your employer already has records of every credit card tip processed through the point-of-sale system. When your numbers match theirs, the trail is clean. Tip-outs to other workers subtract from your gross, leaving the net figure that ends up on Form 4070 at month’s end.
Hold onto your daily records and copies of the forms you submitted for at least four years after the tax becomes due or is paid, whichever is later. That matches the IRS retention period for employment tax records.7Internal Revenue Service. How Long Should I Keep Records
What Happens If You Don’t Report
The IRS can charge a penalty equal to 50% of the Social Security, Medicare, and Additional Medicare taxes owed on tips you didn’t report to your employer.2Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income That’s on top of the tax itself plus interest. On $10,000 of unreported tips, the base FICA is about $765, and the penalty adds roughly another $382 before interest.
The penalty can be waived for reasonable cause: you acted responsibly, the failure wasn’t willful neglect, and circumstances beyond your control contributed to the problem. The IRS evaluates these case by case. A first-time slip with an otherwise clean history helps. Not knowing the rule or forgetting generally doesn’t.8Internal Revenue Service. Penalty Relief for Reasonable Cause
If you already missed reporting some tips to your employer for the year, the cleanup happens on your tax return. Form 4137, Social Security and Medicare Tax on Unreported Tip Income, calculates the employee’s share of FICA on the unreported amount. The unreported income goes on Form 1040, line 1c, and the tax from Form 4137 flows to Schedule 2.2Internal Revenue Service. Form 4137 – Social Security and Medicare Tax on Unreported Tip Income Filing 4137 also gets you Social Security and Medicare credit for the income, which counts toward future retirement and disability benefits.
The New Tip Deduction Doesn’t Replace Reporting
Federal legislation now allows eligible tipped employees to claim a deduction for “qualified tips” on their income tax return, with IRS Notice 2025-69 providing guidance for the 2025 tax year and W-2 forms being updated for 2026 to separately report qualified tips.9Internal Revenue Service. Guidance for Individual Taxpayers Who Received Qualified Tips The deduction reduces income tax on qualifying tip income but does not remove the obligation to report tips to your employer each month. The IRS guidance actually points to Form 4070 amounts as one way to determine qualified tips for the deduction, so the monthly report both drives withholding during the year and helps substantiate the deduction when you file.