TIP SPLITTING Deduction

[Mairof]

**Tip Splitting  Reg. 1.1191(a)3(ii)**

Is anyone familiar with the input above? I am not sure if this deducts 50% of the tips received and would appreciate further guidance. 

[TaxGuyBill]

Can you clarify exactly which Reg you are referring to?

And can you clarify EXACTLY what the situation is, and what you are trying to do?

[Mairof]

Hi, I would like to know if the tips that receive the employees all are taxable. Do you know if I it is any regulations to reduce the tips amount like if they share the tips with other employees.

I really appreciate your help.

Thank you

[Mairof]

It is for prepared personal income taxes. The W-2 show the tips

[qbteachmt]

Read and follow what is reported in which box(es) with which code(s). You might have Tips reported to the employer, or tips allocated to the employee. Are you trying to further split it or deduct it somehow?

Such as:

"Allocated tips are tips your employer assigned to you in addition to the tips you reported to your employer for the year. If your employer allocated tips to you, that amount will appear in Box 8 of your W-2. No income, social security, or Medicare taxes are withheld on allocated tips. These taxes must be figured on Form 4137 using the amount from Box 8"

"If your employer did not collect all social security and Medicare taxes you owe on tips, the amount may be shown in Box 12 of your W-2"

And: https://www.irs.gov/taxtopics/tc761

[Just-Lisa-Now-]

Social Security Tips? Thats what they reported to their employer as having received....if they gave away some of their tips to other servers, busboys, etc, they shouldnt have reported that to the employer.

[Mairof]

Thank you. The W-2 show in Line 7 (Social security tips) $10,000. When I am doing Personal Income Tax for the person show due amount Federal payment. I would like to know if the IRS allow to reduce the amount for tips like 50%? if so, where I can input in the Proseries Income Tax 2021

[Mairof]

one of my friends say that this is regulation to support the 50% deductions in the income tax but I am not sure: Tip Splitting  Reg. 1.1191(a)3(ii)**

[TaxGuyBill]

Tips should be the amount your client received, AFTER they forwarded tips to other employees.

As far as I can tell, there is no such thing as Regulation 1.1191, so unless your friend can clarify things, we can't really help with that.  But I am not aware of any 50% deduction in that regard. 

[Mairof]

thank you so much for all your time and help.

Taka care

[qbteachmt]

"one of my friends say that this is regulation to support the 50% deductions"

There needs to be a Reason that something can be reduced. The "friend" is a tax professional? That section of code you keep quoting is for Employee Meals.

Did your taxpayer give half the tips to another, or did they only get half of what is supposed to be their own tips?

[abctax55]

EmployERs can get a credit for the SS tax the employER pays on reported tips included in payroll.

Maybe your *friend* is thinking of something like that?

But the employee pays tax on the tips received/allocated.  If there's a sharing agreement, then that is addressed by the employer before amounts are included on the W-2.

Perhaps a conversation with between the employee & employer is in order.

[qbteachmt]

If you ignore the section punctuation as an error, there is a reference to 50% deductible meals or 100% deductible meals, when the meals are provided to employees, and there are temporary provisions in place in support of covid-related recovery efforts. This is part of Business Deductions for Business Meals and has nothing to do with payroll Tips. Perhaps someone confused the wording of "restaurant meals" and "server tips" as if that is all related?

Which is why you don't listen to "friends" if they are not professionals for tax regulations.