Form 1040

1c — Tip Income Updated for tax year 2025

What this line means

Tip income you received that was not already included on your W-2. Most tips reported to your employer show up in W-2 Box 1 and go on line 1a. This line is for tips you did not report to your employer — cash tips, tips from customers paid directly to you, or allocated tips shown in W-2 Box 8 that are not included in Box 1.

Does this apply to you?

  • You received cash tips that you did not report to your employer
  • You have allocated tips in W-2 Box 8 that are not included in Box 1
  • You earned tips from side work (catering gigs, freelance bartending) outside your regular employer
  • You split tips with coworkers and your share was not tracked by your employer

Easy to overlook

Allocated tips in Box 8 of your W-2 If you work at a large restaurant (10+ employees) and your reported tips were below a calculated percentage of sales, your employer allocates additional tips to you in Box 8. These allocated tips are not included in Box 1 and are not automatically reported as income — you must add them on line 1c yourself. Ignoring Box 8 is one of the most common tip-reporting errors. 1 [SOURCE: IRS Publication 531 — Reporting Tip Income]

Cash tips under $20 per month You are not required to report tips under $20 per month to your employer, but you are still required to report them as income on your tax return. The $20 threshold only determines your employer’s withholding obligation — it does not make the tips tax-free. Over a full year, unreported small cash tips add up. 2 [SOURCE: CP2000 pattern — unreported allocated tips]

Watch out for this

Assuming all tips are already on your W-2. W-2 Box 1 only includes tips you reported to your employer. Cash tips you kept, tips from side gigs, and allocated tips in Box 8 are all separate amounts that must be added on this line. The IRS cross-references large food and beverage establishment reports to identify underreported tip income.

  • Line 1a — Form 1040 — W-2 wages that already include tips reported to your employer
  • Line 1z — Form 1040 — Total wages line where tip income flows into
  • Form 4137 — Social Security and Medicare Tax on Unreported Tip Income — required if you have unreported tips

Footnotes

  1. IRS Publication 531, Reporting Tip Income. https://www.irs.gov/pub/irs-pdf/p531.pdf ↩

  2. IRS CP2000 Notice, Allocated Tip Matching. https://www.irs.gov/individuals/understanding-your-cp2000-notice ↩

Back to top