Do Restaurant Employees Report Tips Over $20 Monthly to Employers?
Key Takeaways Yes, restaurant employees must report all cash and charged tips totaling $20 or more per month to their employers by the 10th of the following month. Non-cash tips are not reported to the employer. All tips—regardless of the $20 monthly reporting threshold—must be included on individual tax returns. Failure to report tips can result in a penalty equal to 50% of the Social Security and Medicare taxes owed on unreported tips. Service charges added by employers (like automatic 18% gratuity) are treated as wages, not tips, with different tax implications. Employees must maintain daily tip records to substantiate their total tip income throughout the tax year. Yes, You Must Report Cash Tips of $20+ Monthly Restaurant employees are legally required to report all cash and charged tips totaling $20 or more per month to their employers. This federal requirement applies to tips received from any single employer during a calendar month. The Internal Revenue Code mandates this report...