What happens if you forget to declare tips?
What happens if you forget to declare tips? If you fail to report your tips to your employer, the IRS can impose a penalty equal to 50% of the Social Security and Medicare tax you fail to pay.
What percentage of tips go unreported?
The standard minimum tip rate of 8% is in practice adjusted by the IRS in accordance with local demographics and statistics. Tip income has been scrutinized more than ever during the past five years. The IRS estimates that 84% of tip income, approximately $500 million each year, is never reported.