All tip income is subject to federal income tax. Individuals who receive $20 or more per month in tips from one job must report their tip income to their employer. Tips that are reported to employers are included with wages on Form W-2, box 1.

Taxpayers who receive tips worth $20 or more in a month and do not report all of those tips to the employer must report the social security and medicare taxes on the unreported tips as additional tax on Form 1040. Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to compute and report the additional tax.

	A taxpayer who fails to report tip income to the employer may be subject to a penalty equal to 50% of the social security and Medicare taxes owed on unreported tips.

	Question: Can taxpayers who did not report tips of $20 or more in a month to their employer ever use Form 1040EZ or 1040A to report those tips to the IRS? Answer: No. Tips that were not reported to the employer must be reported on Form 1040; they cannot be reported on Form 1040EZ or 1040A.