Hello XXXXXXXX,

Technically an employer must report any tips that the employee reports to them that are over $20 per month. It is ultimately the employees legal duty to report their tips to you each month and the IRS when they file their income tax return. As an employer, assuming that you are in the food and beverage business you can also participate in the Attributed Tip Income Program. You can get more details about the program and reporting requirements via the IRS website at: http://www.irs.gov/taxtopics/tc761.html. Each employee must report their tip income over the $20 to you by the 10th of the following month. If they have received tips via credit card charges, you will already have some of their tip amounts that you can use to calculate all withholdings. For the employees, they can look at IRS pub. 531 for details on their duties to report.

Hello XXXXXXXX,

At a minimum you must report the 100% of the credit card tips allocated to each employee. In the case of pooling of tips, the employee must only report the portion that they retain. So, if for example the employee generally only reports 10%, and their credit card tips after pooling amount to less than 10%, then you would ask them if they have any tips to declare over the 10%. If not, then you withhold up to the 10%. If the amount is over 10%, then you must withhold for the actual amount.

You're welcome.