[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3401(a)(16)-1]

[Page 210]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
              Subpart E_Collection of Income Tax at Source
 
Sec. 31.3401(a)(16)-1  Tips.

    Tips paid to an employee are excepted from wages and hence not 
subject to withholding if--
    (a) The tips are paid in any medium other than cash, or
    (b) The cash tips received by an employee in any calendar month in 
the course of his employment by an employer are less than $20.

However, if the cash tips received by an employee in a calendar month in 
the course of his employment by an employer amount to $20 or more, none 
of the cash tips received by the employee in such calendar month are 
excepted from wages under this section. The cash tips to which this 
section applies include checks and other monetary media of exchange. 
Tips received by an employee in any medium other than cash, such as 
passes, tickets, or other goods or commodities do not constitute wages. 
If an employee in any calendar month performs services for two or more 
employers and receives tips in the course of his employment by each 
employer, the $20 test is to be applied separately with respect to the 
cash tips received by the employee in respect of his services for each 
employer and not to the total cash tips received by the employee during 
the month. As to the time tips are deemed paid, see Sec. 31.3401(f)-1. 
For provisions relating to the treatment of tips received by an employee 
prior to 1966, see paragraph (b)(11) of Sec. 31.3401(a)-1.

[T.D. 7001, 34 FR 1001, Jan. 23, 1969]