Supreme Court Rules on Income From Tips
Fior D'Italia, Inc. v U.S., (SCt 6/17/2002)
The Supreme Court ruled that the IRS can use estimates of tip income from restaurant employees to calculate the employer's share of FICA taxes on cash tips.
Commissioner Rossotti issued the following statement in response to this ruling:
The Court's important decision upholds our ability to make sure all Americans pay a fair share of taxes. The IRS plans to continue working cooperatively with the Restaurant Industry and other industries where tips are common. Our goal is to create a fair, accurate system for reporting tip income while minimizing burden on taxpayers and business.
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.