Do all employers have to report tips received by their employees for FICA purposes?

All employers are required to report tips received by their employees for FICA (Federal Insurance Contributions Act) purposes, regardless of the size of the business or the industry in which they operate. This requirement ensures that all earnings, including tips, are accounted for in the calculation of Social Security and Medicare taxes, which ultimately contributes to the employees' eligibility for benefits from these programs.

By mandating that employers report tips, the IRS is working to ensure that workers in the service industry, among others, have their full earnings recognized for tax purposes and for calculating future Social Security benefits. It's important for employers to be aware that they must keep accurate records of tips received by employees and report them accurately on payroll tax returns.

Although there are specific thresholds concerning the reporting of tips (such as tips exceeding $20 in a month being reported by employees to their employers), the foundational requirement applies universally to all employers. This is why the assertion that all employers must report tips for FICA purposes stands as the correct perspective.