Shayna is a restaurant hostess with tip income. Which of the following statements would help her to report her tip income accurately?

Question

Any tips Shayna receives are excluded from gross income and are not subject to federal income tax.
If Shayna does not report her tips to her employer, they are not taxable.
Shayna should use Form 4070-A to keep a daily record of her tip income.
Tips under $20 a month are not taxable.

Answer 1

To help Shayna report her tip income accurately, the following statement is the most helpful:

Shayna should use Form 4070-A to keep a daily record of her tip income.

This statement emphasizes the importance of keeping accurate records of her tip income, which is crucial for reporting her income properly on her tax returns.

The other statements are incorrect:

• Tips are included in gross income and are subject to federal income tax.
• All tips are taxable, even if not reported to her employer.
• All tips, regardless of amount, must be reported; tips under $20 a month are still taxable.

Answer 2

Question 7 of 30.
Greg is an unmarried, 29-year-old taxpayer. He received the following income for the year:
Wages: $44,500.
Interest from a bank savings account: $50.
Unemployment compensation: $7,000.
Gift from his father: $3,000.
How much of Greg's income is considered earned income?
$44,500
$44,550
$51,550
$54,550

Answer 3

To determine how much of Greg's income is considered earned income, we first need to identify which components of his income qualify as earned income.

Earned income generally includes wages, salaries, tips, and other employee compensation. It does not include interest, unemployment compensation, or gifts.

Based on the information provided:

• Wages: $44,500 (earned income)
• Interest from a bank savings account: $50 (not earned income)
• Unemployment compensation: $7,000 (not earned income)
• Gift from his father: $3,000 (not earned income)

Therefore, the only portion of his income that is considered earned income is his wages.

Total earned income = $44,500

So, the answer is $44,500.