There are three categories for tip income.
First, you have reported tips to your employer. It is included in W-2 Box 1.
Second, your employer allocated tips to you. It is included in W-2 Box 8.
Last, you have not reported tips to your employer and the tips are not included in allocated tips.
If either of following condition applies, you must file Form 4137 to report Social Security and Medicare Tax on Unreported Tip Income:
- You received cash and charge tips of 20 or more in a calendar month and did not report all of those tips to your employer. The $20 rule applies separately to the tips while you worked for more than one employer and not to the total you received.
- You have allocated tips in your W-2 Form. If your actual tips is not agreed with the number in your W-2, please your records that show the actual amount of tips you received.
After you figure out the total taxable tip income, you should include this amount into Line 7 of Form 1040.
See Pub 531 for more details
PSQ
Source: http://www.irs.gov
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