J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

26.6 When Tips Are Subject to Withholding

Tips are subject to income tax and FICA (Social Security and Medicare) withholdings. If you receive cash tips amounting to $20 or more in a month, you must report the total amount of tips received during the month to your employer on Form 4070 (or a similar written report). Include cash tips paid to you in your own behalf. If you “split” or share tips with others, you include in your report only your share. You do not include tips received in the form of merchandise or your share of service charges turned over to you by your employer. Make the report on or before the 10th day after the end of the month in which the tips are received. (If the 10th day is a Saturday, Sunday, or legal holiday, you must submit the report by the next business day.) For example, tips amounting to $20 or more that are received during January 2013 are reported by February 11, 2013 (February 10 is a Sunday). Your employer may require more frequent reporting.

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Filing Instruction

Tip Reporting

If you have not reported tips of $20 or more in any month, or tips are allocated to you under the special tip allocation rules, you must compute Social Security and Medicare tax on that amount on Form 4137 and enter it as a tax due on Line 57 of Form 1040; attach Form 4137 to Form 1040. The unreported tips must be included as wages on Line 7 of Form 1040. ...