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Report Cash Tips to Your Employer by the 10th: $20 Rule
Educational information only. Not tax advice. Not affiliated with the IRS. Last checked against IRS pages: October 17, 2026. Examples use made-up numbers. Anything marked expected should be re-checked.
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Short answer: The IRS says employees who receive cash tips of $20 or more in a calendar month while working for an employer must report the total to the employer by written report by the tenth day of the following month. Tips under $20 in a month don't need to be reported to the employer but must be reported as income on the tax return. Cash tips include tips received directly from customers, from other employees under a tip-sharing arrangement, and charged tips (credit/debit) that the employer distributes.
Why it matters for no tax on tips
- The 2026 W-2 box 12 code TP reports total cash tips reported to the employer (IRS W-2 instructions), so unreported tips may not appear there.
- Service charges added to a bill or fixed by the employer (auto-gratuities) are non-tip wages, not tips (IRS Topic 761).
- For tax years 2025 through 2028 employees may be able to deduct up to $25,000 of qualified tips in tipped occupations (IRS Topic 761). Other conditions apply: phase-out, occupation list.
Record keeping
The IRS refers employees to Publication 531 ("How to keep a daily tip record"); employers may offer electronic tip reporting.
Made-up example
You received $150 cash tips in March: report to your employer by April 10. In May you got $15: no employer report is required, but the $15 is still income.
FAQ
Who does the withholding? The employer uses the report to figure payroll taxes (IRS Topic 761).
What if I forgot? Not covered; check Publication 531 and speak to your employer.
What we could not verify
- Publication 531 details and Form 4070/4137 requirements (only the Topic 761 page and W-2 instructions were read).
- Weekend/holiday handling of the 10th.
Sources (official)
- IRS, Topic no. 761, Tips: withholding and reporting (reviewed October 12, 2026) — https://www.irs.gov/taxtopics/tc761 (read October 17, 2026)
- IRS, Instructions for Forms W-2 and W-3 (2026) — https://www.irs.gov/pub/irs-pdf/iw2w3.pdf (read in part October 17, 2026)
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Not tax advice. Examples use made-up figures. Nothing here has been reviewed by a tax professional. See the disclosure.