Yes, You are correct that the only place that reports "tips payout" is in the unreported tip section but is useless since the full amount of the tips is reported in Box 1 of the W2. You would need to enter an amount in Box 10A to offset the amount of the "tips payout" or else you won't be able to e-file your return. Here's my suggestion on how to get around this issue.
- Log into your account
- Select Wages and income
- Less Common income
- Miscellaneous Income, 1099-A, 1099>start
- Scroll to the bottom of the page to Other Reportable Income
- Other taxable income, answer yes
- Then give a brief description of the income and the amount. Here report Gross Tip income reported on a W2 that did not include "tip outs" paid to other employees and record the amount with a negative number.
Now go to unreported tips and report the gross amount of the tips in Box 10A and then report the tip outs in Line 10F.
I can't guarantee that this will escape scrutiny from the IRS so I suggest that your daughter to keep meticulous records of all her tips and her payouts and any other statements her employer gives to her.
Save this transcript I just described and I'll stand by my advice I give to you. We will use the argument that if these tips can be offset using the unreported tip method, this should be available to those people who have a W2 with the gross amount of tips being reported as taxable income.
[Edited 03/18/2025|5:15 pm PST]
@bkilmer2
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