Im a server in a restuarant. I need to deduct "tip outs" paid to bussers, bartenders, and food runners paid each time i worked. It adds up to $$$Thousands$$$. How?

[Vanessa A]

The answer is above by ErnieSO.  

Basically, even though they are tip outs, IF your employer DID include the tips you paid out to others as tip sharing, then you would enter your W-2 and afterwards, you would select Unreported Tips under Lets Check for Uncommon Situations.  

Then you will enter Total Tips that you piad out through tip sharing.  Do NOT include tips on here that were NOT included on your W-2. 

[greatpal]

Do you know then how the tips that are on your w-2, but a portion has been paid out to a tip pool is actually reflected on the tax return?

Thanks!

[greatpal]

The owner will not amend your W-2, You cannot go the IRS, DOL, BBB or the Hague.

How do I reduce my tip income reported on my w-2 on my 1040? 

It cannot be done on IRS Form 4137 because the is only for unreported tips that you received.

I do not think it advisable to enter what is on your w-2 less these payouts.  

I am thinking maybe put on Schedule 1 Line Z, and describe it as maybe redistribution of Tips???

Anyone?  Thanks!

[SusanY1]

There is a way to make an adjustment to your allocated tips, but you must be sure that you have an appropriate and complete log of all tips, such as a tip book, to substantiate the adjustments. 

This is more commonly done for instances where your allocated tips are based on sales but are less than what you actually received, rather than for tip-outs. 

However, the mechanics of adjusting the allocated tips in TurboTax are to adjust the box 8 number in the follow up questions after entering your W-2.  
 

You do not send any tip book/tip log that you have with your return but keep it somewhere that you can easily access it for at least 3 years in case the IRS asks you to support the adjustment.  

[bkilmer2]

Thx for this, but still need help.  My daughter's employer/restaurant only reports GROSS tips received (she is a waitress), and reports this on W-2 Line 7.   All good.  But like most servers, she pays tipouts to other staff - 15% of her tips received.  Thus, her W-2 Line 7 is higher than her actual income.   When I try to use the Unreported Tip section in TurboTax (which feeds federal W-2 Additional Wage and Tax Information form), I cannot enter a Tips paid out by you (line 10e) unless I ALSO enter additional unreported tip income.    The effect of this just adds more tip income before taking it back off....and doesn't lower with is taxable on W-2 Line 7.   Suggestions?

[DaveF1006]

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. 

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. 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