Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Other Taxes Workout

Tip Income

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:

  • Reports these tips as part of the wages on Form W-2, box 1, and
  • Withholds social security and Medicare taxes and federal income tax on that income
Tips left on a restaurant table.