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Allocated Tips (continued)

Taxpayers must report allocated tips on their tax return unless either of the following exceptions applies:

  • The taxpayer kept a daily tip record

  • The taxpayer's tip record is incomplete, but it shows that the actual tips were more than the sum of the tips reported to the employer plus the allocated tips.

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

 Form W-2: box 1 shows $26,500 and box 8 shows $11,362.
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