Tips on Taxes on Tips
There has been some talk recently about eliminating taxes on tips, but as of now, customarily tipped employees, such as a servers, bartenders, or hair stylists, often face challenges in having enough Federal, State, or even Social Security taxes withheld from base wages to cover the taxes on the tips.
This video explains the procedure for withholding taxes on tips from wages, and gives a couple of tips to avoid (or at least lessen) balances due on both Federal and state income tax returns.
0:00: Introduction
0:33: What are "tips," and how are they taxed?
2:03: Withholding on wages and tips
4:45: Uncollected Social Security and Medicare Tax
5:29: Possible Solutions
5:56 Conclusion
Need help filling out Form W-4? Click here: • How to fill out a W4 (Revised and Updated!)
To learn more about making (or avoid making) estimated payments, click here: • Making Estimated Payments (or not!)
RESOURCES AND ADDITIONAL INFORMATION:
IRS Publication 531: "Reporting Tip Income": https://www.irs.gov/pub/irs.pdf/p531
IRS Publication 3148: "Tips on Tips": https://www.irs.gov/pub/irs-pdf/p3148
Clockify.me: "Tips for Tipped Employees": https://www.clockify.me/learn/busines...
(BTW, this site is a great resource for state-by-state labor law information)
The Tax Geek on the Site Formerly Known as Twitter: @taxgeekusa
The Tax Geek on Reddit: www.reddit.com/r/askataxgeek
Image and footage credits:
Storyblocks.com
NO ARTIFICIAL INTELLIGENCE WAS USED TO WRITE, EDIT, ANIMATE, VOICE, OR EDIT THIS VIDEO
Intro Music: "Bluesy Vibes" - Doug Maxwell - YouTube Creator Music
Outro Music: "Modern Attempt" - Track Tribe under license from YouTube Creator Music
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or financial advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or financial professional.