Tips Subject to Other Taxes
All tip income is subject to federal income tax. However, tips of less than $20 per month that are not reported to the employer are not subject to social security and Medicare taxes.
Individuals who receive $20 or more per month in tips from any one job must report their tips to their employer. The employer:
For 2011 only, the social security tax rate an employee must pay on tips is decreased from 6.2% to 4.2%.