What are allocated tips?

Allocated tips are tips an employer assigns to an employee. They are in addition to the tips the employee reports to the employer. Restaurants, cocktail lounges, and similar businesses must allocate tips to employees. Allocated tips are shown separately in Box 8 of Form W-2 (W2), Allocated tips. They are not included in the amount in Box 1 of the W-2 (W2) so they need to be shown as income on your tax return and are reported on Form 4137. Enter the amount of allocated tips as unreported tip income on the Employer Unreported Tips screen.

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