If you do not have an amount in Box 8 of your W-2, make sure that you did not check the ''Unreported Tips'' box on the 'Do any of these uncommon situations apply to this W-2? question when entering the W-2.
If your employer allocated tips to you, the allocated tips are shown in box 8 of your Form W-2, Wage and Tax Statement. The allocated tips aren't included in box 1 with your wages and reported tips.
Allocated tips are amounts your employer assigned to you in addition to the tips you reported. For information about the exact allocation method used, ask your employer. Your employer is required to allocate tips only if:
- You worked in a large food or beverage establishment
- You received any tips directly from customers, and
- The amount of tips you reported to your employer was less than your share of 8% (or a lower rate approved by the IRS, if your employer requested it) of food and drink sales.
Generally, you must report the full amount contained in box 8 of your Form W-2. However, you don't report the entire allocated tip amount on your income tax return if you can prove with adequate records that the amount of tips you actually received was less than the allocated amount.
Because Social Security, Medicare, or Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as an additional tax on your return. TurboTax will also complete Form 4137 and include the allocated tips on line 1 of the form as provided in its instructions.
TurboTax handles this entire manipulation when you correctly enter your W-2. No other entries are required by you, but you will need to upgrade because you will need Form 4137.
