Tips paid in cash (or by check, by credit/debit card or via other cash equivalents such a gift certificates, slot tickets or casino tokens) of $20.00 or more, that an employee receives in a calendar month while working for any one employer, are wages subject to FICA, FUTA, and income tax withholding. (Please note: Announcement 2001-16 applies to FUTA taxes for wholly owned tribal businesses.)

Once the amount of tips received by an employee in a calendar month reaches $20.00 from any one employer, the entire amount of tips received is included in the employee’s wages, not just the amount over $20.00.  An employee who receives $20.00 or more in tips must report those tips in writing to the employer by the tenth day following the month in which the tips were received.

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