Posted in Finance, Accounting and Economics Terms, Total Reads: 250
Definition: Tip Income
Tip income is an income earned by a service professional that is not a part of his/her regular wage but is additional to the wage received by him/her. A tip income is usually earned by a person because of the gratuity felt by the customers.
Tip income can be of the forms where a customer tips for the services at a restaurant, money given to a porter for carrying the luggage, or any other activity that is not covered by the employer of the person. This type of income is generally considered as a secondary income for the professional.
A lot of times certain businesses, like hotels, expect the customers to provide tips to their employees for their work and therefore they keep the hourly wage rate lower assuming the employees to make up with the tips. In case of tips collected over a month goes higher than a certain value, the employee is required to report this to his/her employer and to the government. This is because the taxes for tip income are treated differently than the taxes for normal income.