If you receive tips of $20 or more in any month and you did not report the full amount to your employer, you must pay the social security and Medicare or railroad retirement (RRTA) tax on the unreported tips. You must also pay this tax if your Form(s) W-2 shows allocated tips that you are including in your income on Schedule 2 (Form 1040 or 1040-SR), line 5; Form 1040-NR, line 56; or Form 1040-NR-EZ, line 16 (Forms 1040-SS and 1040-PR filers, see instructions.) .
You may be charged a penalty equal to 50% of the social security and Medicare tax due on tips you received but did not report to your employer.
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