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SS-4 (Employer Identification Number (EIN) Application)
SS-5 (Application for a Social Security Card, Replacement or Correction)
UI-1 (Montana Unemployment Insurance Employer Application)
Form 4506 (Request for Copy of Tax Return)
Form 4070 (Employee Daily Record of Tips and Report to Employer)
UI-5 (Montana Employer's Quarterly Wage Report for Experience Rated Accounts)
MW-1 (Montana Withholding Coupon)
GenRegRegistration and Application for Montana State Withholding
State Fund Worker's Compensation Insurance Application
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Form 8822 Change of Address
Social Security Number Verification

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Did you know....?

All tips an employee receives are income and are subject to federal income tax. You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement.

The value of noncash tips, such as tickets, passes, or other items of value are also income and subject to tax.

Reporting your tip income correctly is not difficult. You must do three things.

Keep a daily tip record.
Report tips to your employer.
Report all your tips on your income tax return.

Keeping a Daily Tip Record

Why keep a daily tip record? You must keep a daily tip record so you can:

Report your tips accurately to your employer,
Report your tips accurately on your tax return, and
Prove your tip income if your return is ever questioned.

How to keep a daily tip record.

There are two ways to keep a daily tip record. You can either:

Write information about your tips in a tip diary, or
Keep copies of documents that show your tips, such as restaurant bills and credit card charge slips.

You should keep your daily tip record with your personal records. You must keep your records for as long as they are important for administration of the federal tax law.

If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. To get Form 4070A, ask the Internal Revenue Service (IRS), our office, or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. Publication 1244 includes a 1- year supply of Form 4070A. Each day, write in the information asked for on the form. A filled-in Form 4070A is shown on this page.

If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business if it is different from your employer's name. Then, each workday, write the date and the following information.

Cash tips you get directly from customers or from other employees.

Tips from credit card charge customers that your employer pays you. (Also include tips from debit card charge customers.)

The value of any noncash tips you get, such as tickets, passes, or other items of value.

The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips.

Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. This is part of your wages, not a tip.


Reporting Tips to Your Employer:

Why report tips to your employer?

You must report tips to your employer so that:

Your employer can withhold federal income tax and social security and Medicare taxes or railroad retirement tax,

Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and

You can avoid the penalty for not reporting tips to your employer (explained later).

What tips to report.

Report to your employer only cash, check, debit, or credit card tips you receive.

If your total tips for any one month from any one job are less than $20, do not report the tips for that month to that employer.

Do not report the value of any noncash tips, such as tickets or passes, to your employer. You do not pay social security and Medicare taxes or railroad retirement tax on these tips.

How to report.

If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. Fill in the information asked for on the form, sign and date the form, and give it to your employer. A sample filled-in Form 4070 is shown on this page.

If you do not use Form 4070, give your employer a statement with the following information.

Your name, address, and social security number.

Your employer's name, address, and business name (if it is different from the employer's name).

The month (or the dates of any shorter period) in which you received tips.

The total tips required to be reported for that period.

You must sign and date the statement. You should keep a copy with your personal records.

Your employer may require you to report your tips more than once a month. However, the statement cannot cover a period of more than one calendar month.

When to report.

Give your report for each month to your employer by the 10th of the next month. If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday.

Example 1.

You must report your tips received in April 2007 by May 10, 2007.

Example 2.

You must report your tips received in May 2007 by June 11, 2007. June 10th is on a Sunday, and the 11th is the next day that is not a Saturday, Sunday, or legal holiday.

Final report.

If your employment ends during the month, you can report your tips when your employment ends.

Penalty for not reporting tips.

If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security and Medicare taxes or railroad retirement tax you owe on the unreported tips. The penalty amount is in addition to the taxes you owe.

You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. To do so, attach a statement to your return explaining why you did not report them.

Giving your employer money for taxes.

Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes.

If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order.

All taxes on your regular pay.
Social security and Medicare taxes or railroad retirement tax on your reported tips.
Federal, state, and local income taxes on your reported tips.

Any taxes that remain unpaid can be collected by your employer from your next paycheck. If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes.

Reporting social security and Medicare taxes on tips not reported to your employer.

If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security and Medicare taxes on the unreported tips as additional tax on your return. To report these taxes, you must file a return even if you would not otherwise have to file. You must use Form 1040. (You cannot file Form 1040EZ or Form 1040A.)

Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure these taxes. Enter the tax on line 59, Form 1040, and attach the Form 4137 to your return.

Allocated Tips:

If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. They are not included in box 1 with your wages and reported tips. If box 8 is blank, this discussion does not apply to you.

What are allocated tips?

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 a restaurant, cocktail lounge, or similar business that must allocate tips to employees,

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

You did not participate in your employer's Attributed Tip Income Program (ATIP).

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.

Must you report your allocated tips on your tax return?

You must report allocated tips on your tax return unless either of the following exceptions applies.

You kept a daily tip record, or other evidence that is as credible and as reliable as a daily tip record, as required under rules explained earlier.

Your tip record is incomplete, but it shows that your actual tips were more than the tips you reported to your employer plus the allocated tips.

If either exception applies, report your actual tips on your return. Do not report the allocated tips.

How to request an approved lower rate.

Your employer can use a tip rate lower than 8% (but not lower than 2%) to figure allocated tips only if the IRS approves the lower rate. Either the employer or the employees can request approval of a lower rate by filing a petition with the IRS. The petition must include specific information about the business that will justify the lower rate. A user fee must be paid with the petition.

An employee petition can be filed only with the consent of a majority of the directly-tipped employees (waiters, bartenders, and others who receive tips directly from customers). The petition must state the total number of directly-tipped employees and the number of employees consenting to the petition. Employees filing the petition must promptly notify the employer, and the employer must promptly give the IRS a copy of any Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, filed by the employer for the previous 3 years.

Source: IRS Publication 531