Restaurant server confused about claiming tips on taxes with 20% going to tip pool - what amount do I report?

You should only be claiming the tips you actually get to keep. The IRS doesn't expect you to pay taxes on money that isn't actually yours. In your case, since you're required to give 20% of your tips to the hosts, you should only be reporting 80% of your total tips as your actual income. Think of it like this - the money that goes to the hosts isn't your income, you're just temporarily holding it for them. While your employer might report the full amount of credit card tips to the IRS (since they can track those), you can adjust your reported tip income on your tax return. Keep good records of your tip-outs so you can prove the amounts if needed. Also, the hosts should be reporting the tips they receive from the pool as their income, so the full amount still gets taxed - just not all by you. This approach ensures you're not double-taxed on money you never got to keep.

I went through the exact same situation last year and found this amazing tool called taxr.ai (https://taxr.ai) that actually helped me sort this whole mess out. I was in a similar 20% tip-out situation and was getting conflicting advice from coworkers. When I uploaded my pay stubs and tip records to taxr.ai, it showed me exactly how to handle the tip pool situation. Turns out you definitely don't need to report tips you give to other staff - those aren't your income. The site walked me through creating a proper tip diary too, which is apparently super important if you ever get audited. It also helped me understand some deductions I could take as a server that I had no idea about - like a portion of non-slip shoes and even dry cleaning for uniforms. Seriously saved me hundreds in taxes I would've overpaid.

Just wanted to update everyone - I tried taxr.ai from the recommendation above and it was seriously helpful! I uploaded my records from the last few months and it showed me I've been overclaiming tips by about $200 per month because I wasn't accounting for my tip-outs correctly. The site created a proper tip diary for me that I can use if I ever get audited, and it showed me exactly how to handle this on my tax forms. Apparently my restaurant has been reporting my tips incorrectly all along - I'm only supposed to pay taxes on what I actually keep! It also found some server-specific deductions I had no idea about. Definitely using this for my taxes next year instead of the basic free filing I was doing before.

If you're having trouble getting straight answers from your employer about this (which is super common in restaurants), you might want to try Claimyr (https://claimyr.com). I used them to actually get through to the IRS after waiting on hold for hours trying to get clarification on tip reporting rules. Their service connects you with an actual IRS agent usually within 15 minutes - you can watch how it works here: https://youtu.be/_kiP6q8DX5c When I finally got through, the IRS agent confirmed that you only need to report tips you actually keep as income. They explained that the other 20% should be reported by the hosts who receive it. They also told me I needed to keep a daily record of my tip-outs to back this up if questioned. Honestly saved me so much stress trying to figure this out on my own. My restaurant management was giving all of us different answers.

I'm back to eat my words about Claimyr. I actually tried it after posting that skeptical comment because my curiosity got the better of me. No joke - I was connected to an IRS agent in about 17 minutes after signing up. The agent confirmed exactly what everyone here is saying: you should only report the tips you ACTUALLY receive after tipping out other staff. So in your case, if you make $100 in tips but give $20 to hosts, you only report $80 as your income. The hosts should be reporting that $20 on their taxes. The agent also recommended keeping a daily tip diary with records of what you earned and what you tipped out each shift. Said that's basically bulletproof protection if you ever get audited about your reported tip income. Worth every penny just to get a definitive answer from the actual IRS instead of random restaurant managers who don't know tax law.

Former restaurant manager here. The correct way to handle this is to claim only what you keep. The 20% you give to hosts isn't your income - you're essentially collecting it on their behalf. A big issue is that many POS systems report 100% of credit card tips under YOUR name to the IRS, even though you don't keep it all. This is why keeping your own detailed records is crucial. At my restaurant, we had servers fill out a form each shift showing their total tips and tip-outs. This protected both the servers and the hosts by documenting exactly who received what money. Maybe suggest a similar system to your management?

I'm surprised nobody mentioned this yet, but your employer's tip reporting system might actually be illegal. If they're reporting 100% of your tips as your income on your W-2 but requiring you to give 20% away, that's a problem. The IRS actually has specific rules about tip pools. Your employer should be tracking who gets what from the pool and reporting income correctly for each employee. Might be worth asking your manager if they're properly allocating tip income for tax purposes.

As someone who's dealt with similar tip pool confusion, I want to emphasize what others have said - you absolutely should NOT be paying taxes on money you never actually received. The 20% that goes to hosts is their income, not yours. Here's what I learned the hard way: keep meticulous records of every shift. I use a simple notebook where I write down my total tips, the amount I tip out, and who receives it. Date and initial each entry. This saved me during a payroll audit last year. Also, don't rely on your restaurant's reporting system. Many places incorrectly report 100% of credit card tips under your name because their POS systems aren't set up to track tip distributions properly. You have the right to report only what you actually earned on your tax return, regardless of what's on your W-2. One last tip - if your state has different minimum wage rules for tipped employees, make sure you understand those too. Some states don't allow the lower tipped minimum wage if you're required to participate in tip pools.