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Tax deductions for restaurant workers

If you are a food or beverage service employee, you should receive Form W-2, Wage and Tax Statement, from your employer. A food or beverage service employee may be a bartender, cook, kitchen helper, waitress/waiter, busboy, maitre d', hostess, dining room captain or wine steward. There are no longer any work deductions available for employees in the food services industry.

Claiming Tips on Your Tax Return

You may receive additional income in the form of tips. Any tips that you reported to your employer are included with your wages on your Form W-2, Box 1. Although you are not required to report tips of less than $20 a month to each employer, these tips are still subject to income tax. You must also include in income the value of non-cash tips such as tickets and passes, and any other tips received but not reported. Additionally, if your employer allocated tips to you, they are shown on your Form W-2, Box 8. They are not included in Box 1 with your wages and tip income that you reported to your employer. Your employer would have allocated tips to you if you:

  • Worked in a tip-related restaurant, bar, salon, driving business, etc.
  • Reported tips that were less 8% of the food and drink sales during your shift, and you did not keep daily records of your tips.

If your Form W-2 shows allocated tips, and you don’t have daily tip records, you are subject to income, Medicare, and social security taxes on the tips.  Calculate your share of the Medicare and Social Security taxes on Form 4137, Social Security and Medicare Tax on Unreported Tip Income. You must also include the allocated tips from your W-2, Box 8 in your total income on Form 1040.

If you are self-employed, tips must be included in the gross income for your business. Tax reform did take away the deduction for job expenses when you are an employee, but you can still deduct your business expenses if you are self-employed.

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