Final answer:
Allocated tips should be reported in Box 8 of the W-2 form. This box is specifically used by employers to report tip income allocated to employees. This information is separate from wages and other tip income that might show up in other parts of the W-2.
Step-by-step explanation:
Allocated tips should be reported in Box 8 of the W-2 form. Employers use Box 8 to report income allocated by the employer to employees as tips. These are amounts that the employer has determined and allocated to employees. These tips are not included in boxes 1, 3, 5, or 7. If you received tips that are not included in Box 1, you need to report them as income on your tax return.
When it comes to taxes, it's important to understand where to find certain types of income and tax information on your W-2. The earned income credit is a tax credit for low to moderate-income working individuals and families, primarily those with children. To calculate this credit, you would use information found in Box 1 along with other criteria outlined by the IRS.
For instance, someone referencing Box 1 of their W-2 form would do so to locate their total taxable wages or salary which includes any tips already reported to the employer, in order to calculate their taxable income. This information is also necessary to calculate the correct amount of tax liability and potential refunds or amounts owed when filling out a tax return. For example, you might combine the summed values from lines 7, 8, and 9 to find your total payments and credits, and then locate your tax in the tax table.