When are tips paid by a customer to an employee subject to employment taxes?
Tips paid to an employee are treated as regular wages and subject to federal income tax withholding in the same manner as other employees.
Note: Cash tips must exceed the $20 per calendar month minimum and reported to the employer to be treated as wages. Cash tips that do not meet the $20 minimum must be reported by the employee on Form 1040, but are not subject to FICA and FUTA.