I’m a bartender. How do tip share from servers and my tip-out to barbacks work?

Example math

One week behind the bar. Money comes in from two places and goes out to one.

In

• Tips customers leave at the bar: $700 ($550 on cards, $150 cash)
• Tip share from servers for drinks you made on the service bar: $200
• Total in: $900

Out

• Say your bar tips out 10% of everything you take in to the barback (illustrative): $900 × 0.10 = $90

Yours: $900 − $90 = $810. That’s what you report for the week. The barback reports the $90.

Now the year. Say you have 48 weeks like that one: $810 × 48 = $38,880 reported.

1. 1The deduction is capped at $25,000 per return, so only $25,000 counts. Assume your income is under the phase-out.
2. 2Say your marginal rate is 22% (illustrative; enter your own). Illustrative federal income-tax savings ≈ $25,000 × 0.22 = $5,500.
3. 3The other $13,880 is still taxed as normal income. Social Security and Medicare apply to all $38,880.

Not tax or legal advice. The 10% is made up for the example. Use your own bar’s numbers.

Plain English

Money in: the server share is your tips

For taxes, tips you get from other employees count as your tips, and you have to report them to your employer. The servers won’t report that $200. They report only what they keep after tipping you out. If you don’t report it either, it drops out of everyone’s numbers, and it can’t count toward your deduction unless it shows up on your W-2 or on Form 4137.

Report monthly by the 10th of the following month (next business day if the 10th is a weekend or holiday).

Money out: the barback’s share isn’t yours

Once you hand the barback their cut, it’s their tips. Don’t report it as yours. Keep a record of what you paid out and the barback’s name, shift by shift, so your reported number matches the week you actually had.

The wage-law trap: the manager who picks up a bar shift

Federal wage law says managers and supervisors can’t receive tips from a pool. DOL gives a bartender example: a restaurant manager who sometimes works a bar shift can’t take a share of the pool for servers, bartenders, and bussers, even on the nights they tend bar. They can keep tips customers give them directly for service they alone provided, and the house can require them to put those tips into the pool. They still can’t take anything out.

Two more federal rules if you’re paid the $2.13 tipped cash wage instead of $7.25: your employer has to tell you the required tip-out amount, and a required pool can include only workers in jobs that customarily get tips. DOL’s examples of those jobs include service bartenders. Your employer can’t keep any part of the pool. More on who can take from the pool: Can my manager or the owner take money from the tip pool?. Your state may have stricter rules.

The tax trap: two jobs on one W-2

If you bartend most nights and barback some shifts, the IRS list has both: Bartenders (101) and Dining room and cafeteria attendants and bartender helpers (104), which lists bar back as an example. For 2026, box 14b of your W-2 can show up to two occupation codes. Check that your W-2 shows the codes for the jobs you actually worked. If any of your tips came from a job that isn’t on the list, box 14b has to include code 000.