Tips in a non-tip industry?

[hi123455]

Hi, I am filing my return and a question that has been confusing me is if I received any tips. I previously worked a retail job from 2024-2025 where I was occasionally given cash tips from customers (even though that technically goes against our policy). I wasn't sure of the exact amount of these, they weren't a lot, and these weren't reported to management/accounted for, so I'm not sure if I should report these when filing, if I should, how. Also, would I need to make amendments to my 2024 return? I did not report them then, but I am not sure if I should change it. Thank you.

[MaryK4]

Yes, the IRS technically requires you to report all income, including small cash tips, regardless of your employer's policy.

Since these tips weren't reported to your manager, they won't be on your Form W-2. You’ll need to estimate the total amount you received during the 2025 portion of your employment.  On your tax return (Form 1040), you’ll report these as "unreported tip income."

You will need to fill out IRS Form 4137 - TurboTax will create it for you based on the information you provide. This form calculates the taxes your employer didn't withhold from those tips.  If you received less than $20 in tips in a single month, you aren't required to report them to your employer, but you are still legally required to report them as income on your tax return.

2024 Return - Legally, you should report all income.  You should file Form 1040-X to amend your 2024 return if you left out income.

If the amount was very small (e.g., $50–$100 total for the year), the tax impact is likely negligible. 

[hi123455]

Thank you. For the amount I report, since I don't remember a certain amount, should I make an estimate?

[DianeW777]

Yes, you can estimate it as long as you have reasonable data that you can substantiate should you need it. Review the steps below for including those tips and paying your social security and medicare tax on those tips.  The following links are about the new One Big Beautiful Bill Act (OBBBA) regarding tips for 2025. For 2026, the employer must report these on your W-2.

• What's the new tax law for tips?
• How do I enter tips in TurboTax?

How to enter your unreported tips on your tax return:

1. After entering your W-2, look for the Let's check for other situations screen.
2. Check the box next to Tips not reported on my W-2.
3. Answer our follow up questions and TurboTax will automatically create Form 4137, Tax on Unreported Tip Income.
4. Finish your return as usual, but do not e-file it. It must be printed and mailed.
5. Create an explanatory letter for the IRS. Your letter should mention that:
   • Your employer didn't include the full amount of tips on your W-2.
   • You kept records of your tips and did not report them to your employer.
6. Include the letter with your return when you mail it to the IRS. (Be sure to keep a copy of the letter with your tip records and a copy of your tax return.)
7. The IRS will then contact your employer about collecting payroll taxes.

@hi123455 

[hi123455]

I’m afraid I don’t have any record or evidence of these tips. These were all cash tips that I have neither separated nor deposited to my Bank Account, and I had not written them down as I did not know I would have needed to. They were not part of my regular income. So I’m not really sure what I should do in this particular case. I went ahead and submitted my 2025 return while it was ahead of the deadline, but I intend to adjust that with the 2024 return with those tips. I’m just worried there is not any physical evidence to substantiate it. 

[MaryK4]

If/because the amount is minimal, you are probably okay to skip for now and start today keeping track for 2026.  Honestly most people would not report.  @hi123455 

[hi123455]

Thank you. All of this advice is good to know for future reference!