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posted May 31, 2019 8:34:52 PM

Hello I am a server and in my W-2 what does "allocated tips"mean?

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1 Best answer
Level 9
May 31, 2019 8:34:52 PM

These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Your employer will have done this only if:

  • You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and

  • The tips you reported to your employer were less than your share of 8% of food and drink sales.

No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips.

How were your allocated tips figured.   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. For information about the exact allocation method used, ask your employer.

1 Replies
Level 9
May 31, 2019 8:34:52 PM

These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Your employer will have done this only if:

  • You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and

  • The tips you reported to your employer were less than your share of 8% of food and drink sales.

No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips.

How were your allocated tips figured.   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. For information about the exact allocation method used, ask your employer.