I get tip-outs from servers. Do I have to report them?
The short answer
Example math
You’re a busser. In March you get $850 in tip-outs from four servers (illustrative). You also work weekends at a second job, where you got $15 in tips in March.
- Restaurant job: $850 is $20 or more, so you report the $850 to that employer by April 10. If the 10th falls on a weekend or legal holiday, the deadline moves to the next business day.
- Second job: $15 is under $20, so you don’t report it to that employer for March. It’s still income on your tax return.
- The deduction: bussers are on the IRS list of tipped occupations (code 104, Dining room and cafeteria attendants and bartender helpers). Say your reported tip-outs for the year come to $9,000, and your income is under the phase-out. Say your marginal rate is 12% (illustrative; enter your own). Illustrative federal income-tax savings ≈ $9,000 × 0.12 = $1,080.
- Social Security and Medicare still apply to the $9,000.
Not tax advice. The dollar amounts are made up for the example.
Check your estimate
Enter the tip-outs you received and reported, plus any tips customers gave you directly.
Open the calculator
Plain English
Tip-outs you receive are your tips
For taxes, money you get from coworkers through tip-outs, tip splitting, or a tip pool counts as your tips. The IRS says you must report tips you receive from other employees. That applies to workers tipped directly by customers and to workers tipped through coworkers, like bussers and barbacks.
When to report
Report each month’s tips to your employer by the 10th of the following month. If the 10th is a Saturday, Sunday, or legal holiday, you have until the next business day. A single report can’t cover more than one calendar month.
The under-$20 exception
If your total tips from one job are under $20 in a month, you don’t report them to that employer. You still include them as income on your tax return.
If a tip-out never got reported
To count for the federal tip deduction, tips have to show up on your W-2 (for 2026, box 12 code TP) or be reported on Form 4137. The deduction is capped at $25,000 per return and lowers federal income tax only. Social Security and Medicare still apply.
The servers’ side
The server who tipped you out reports only what they kept. The same dollars shouldn’t be counted by both of you. See Do I pay tax on the tips I tip out?
Common mistakes
- Treating tip-outs as a gift from coworkers instead of tips.
- Reporting late, or lumping two months into one report.
- Skipping a small second job’s tips on your return because you didn’t have to report them to that employer.
- Assuming tip-outs you never reported can still count for the deduction.
Official sources
Last verified:
Checked IRS Publication 531, the IRS tip recordkeeping page (reporting deadline and the under-$20 rule), the IRS occupations list, and the 2026 W-2 instructions.