Tip Outs

[IRC]

I have had a few servers come in with 1040 Line 21 adjustments to their income because of "tip outs", I have been recently asked if I can report his tips as gifts because there is a tax preparer that does that to other servers. My response was I can not do that for you but you are welcome to do your taxes were ever you'd like and I sent him on his marry way. Has anyone else ever encountered this? Is line 21 a place where you can put tips that were "over reported" by the employer? I'm asking for 4070 forms attached with the 4070a forms in order for me to make any adjustments. This has been a very gray area for me but the adjustments I have been making are on the actual W2 and inform clients of a letter and they should provide records when the IRS letter is received. 

[Just-Lisa-Now-]

If you're referring to social security tips, if the employee tipped out, they shouldnt have reported those tips to the employer, the W2 should be accurate as is.

Its been a long time since Ive seen allocated tips on a W2.  I remember long ago we would tip out on Line 21 as a negative when there were excessive allocated tips on the W2...I dont think that's a widely accepted practice anymore.

[IRC]

I have been telling people that as well and they have mentioned that they have no control over that. A few clients have expressed that the employer tells them that everything needs to be reported. I have been handing out 4070 forms to clients that believe their employer has over reported tips. I also have clients says that they need to report a percentage of sales so the employer reports the tips for them and there is no control over what tips are reported on line 7 of the W2. I have just been struggling with trying to explain to clients that if we change any numbers they should expect a love letter from the IRS.

[TaxGuyBill]

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@IRC wrote:

I have been making are on the actual W2 and inform clients of a letter and they should provide records when the IRS letter is received. 

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You should actually be using Form 4852 as a Substitute W-2.  Otherwise, yes, that is the proper way to do it if the employer is making the W-2 incorrectly.  The IRS will eventually contact the employers to correct things.