North Charleston, SC (PRWEB) October 7, 2007
Many employees working for tips are reluctant to report the full amount of the tips they receive. A few dollars here and there that are not reported can add up in the long run. It is actually more beneficial than these employees know to honestly report all of their income.
According to Jack Grooms, Licensed Taxpayer Representative for JK Harris and Company, there are several reasons to report your tip income to the IRS:
- Accurate reporting avoids penalties and interest that may be applied if you are audited.
- Tip reporting increases Social Security credits, which helps the employee maximize Social Security and Medicare benefits at retirement.
- Accurately reporting income may increase your chance of receiving financing for a car, home, or other necessities.
Grooms reminds tipped employees that penalties for not reporting tips are steep.
"An employee that fails to report tips to their employer can be subject to penalties equal to 50% of the Social Security and Medicare taxes they owe on unreported tips, as well as having to pay the taxes owed," said Grooms. "The penalty can be avoided if the employee can show reasonable cause for not reporting tips to their employer."
The IRS recommends employees keep a daily tip record to accurately report tips to their employer, to the IRS and to prove their tip income if their return is ever questioned.
Employees can keep a tip record in one of two ways; either by writing information about tips in a tip diary or by keeping copies that shows tips, such as restaurant bills or charge card slips. Employees can also use Form 4070A, Employees Daily Record of Tips. More information can be found regarding all IRS forms at http://www.irs.gov.
About JK Harris
JK Harris & Company, LLC, (http://www.jkharris.com) based in North Charleston, S.C., is the nation's largest tax resolution firm and has served over 200,000 customers since its founding in 1997 by John K. Harris. JK Harris consultants are available to meet with consumers in over 425 locations nationwide by appointment only. The company also provides services for student loan debt, investment fraud, fee-based financial planning, tax return preparation, and audit representation.