What are tips assigned by an employer to an employee called?

When tips are assigned by an employer to an employee, they are classified as allocated tips. This classification is crucial in the context of tax reporting and understanding how different types of tips are treated for tax purposes.

Allocated tips refer specifically to tips that are assigned to employees by the employer, typically in situations where there is a custom of tipping or when employees do not report their actual tips. This means that the employer calculates a hypothetical amount of tips based on certain factors such as total sales and the number of employees. For example, if a restaurant uses a standard percentage of sales to determine what tips should be allocated to their servers, these figures are considered allocated tips.

Understanding this distinction is important because allocated tips often have implications for tax reporting and can affect an employee's income tax liability. Properly classifying and reporting allocated tips ensures compliance with tax laws and federal guidelines regarding tip income.

The other terms listed, while related to the concept of tips, do not accurately describe tips assigned by employers. "Declared tips" typically refers to the tips that an employee reports to their employer. "Supplemental tips" often implies additional remuneration beyond regular wages or tips, while "estimated tips" suggests an approximation, which does not align with the formal allocation process.