Do I qualify for tip deduction?

[mckinly16]

Hello, I’m a piano tuner and get tips occasionally. Do I qualify for tip deduction? If so, what industry and job role would I select? A.I. suggests Recreation and instruction for industry and self-enrichment teacher for role but that just seems like a piano teacher. Thanks

[VolvoGirl]

Do you get a W2 for work or are you filing as self employment on Schedule C?     Do you include the tips in your gross income?

[Vanessa A]

Possibly.  A piano tuner would be considered someone who customarily or regularly receives tips.  If you are going to people's homes to repair/tune their piano you would likely be considered home services. 

In order to deduct the tips the following must apply:

• The tips must be reported to the IRS, either on a W-2 or 1099.  Claiming the deduction on unreported tips would be considered double dipping and you cannot do that.
• Your filing status must NOT be married filing separately
• If your MAGI is over $150,000 if single or $300,000 if married filing jointly, then your tip deduction is phased out
• You still will pay Medicare and Social Security Taxes on the tips and likely state taxes, so it is not just a leave it off your return deal.
• Up to $25,000 in tips may be deducted from your income. 

No Tax On Tips: How it works

[mckinly16]

Yes I get a W2 and some of my tips are reported. I also have unreported cash tips that I have entered into turbo tax.

[RobertB4444]

The tips on your W2 can be deducted from your taxable income.  The unreported tips can be reported as self-employment income and then deducted as tip income but you will still pay social security and medicare taxes on those tips.

[VolvoGirl]

@RobertB4444   I'm testing this.  I entered unreported tip income on schedule C under General (Desktop Home & Business version).    Then where do you deduct tip income  to get it on sch 1-A?  

[RobertB4444]

As of right now in order to get the tip deduction the tip income has to be reported to you on a 1099-K, 1099-NEC or 1099-MISC.  It will carry to the 1-A by itself.  That could change and there is an update expected this Friday and next Friday.

@VolvoGirl 

[bleo1017]

So where it this update as there have been 4 Fridays since this post that said updated were coming that Friday or the next? This is literally the only thing holding back from filing my taxes right now.

[PatriciaV]

Please clarify the issue that is delaying your tax filing. Do you have tips reported on Form W-2 in Box 7?

@bleo1017 

[bleo1017]

The delay is that this error in your software that should be updated has not been and entering my tips from ridehsare (Uber) are all I need to do to wrap up my taxes.

I do not have a W-2 since I am not employed by Uber as I am self employed, nor do I have a 1099-K since Uber does not send out 1099's to drivers that do no earn more than $20,000. 

As tips are considered customary and a regular part of the rideshare service (similar to a cab driver but they get W-2's) Uber does help keep track of our tips (I do myself too but I like to verify with their numbers) as well as all our earnings by sending each driver a tax summary form every year (note again it is not a 1099 or an official tax form, but a verifiable way of keeping track of income earned, tips, and basic expenses such as tolls and service fees collected by Uber).

Your software is not allowing me/us to deduct our tips since we have no 1099 due to the way you all seem to be reading those tax instructions. This despite numerous other tax experts and IRS publications saying otherwise. Ya'll need to revisit this issue and get it resolved cause you are leaving out tons of independent contractors that do not receive an official 1099 form that work in industries that commonly accept tips.

[DawnC]

Any tips you receive as a self-employed taxpayer are part of your gross receipts and are considered taxable income to you.   Per the IRS, that income is subject to both income and self-employment tax.   

Here is a list of self-employment expenses you can deduct.   You cannot deduct income, only expenses.   

IRS Pub 334 - Tax Guide for Small Businesses.  See Chapter 5.

Schedule C instructions - See Line 1 - gross receipts.  

@bleo1017