An employee receives $100 in tips during March. She reports the tips to her employer. Which of the following statements is correct regarding tips?

a) The employer adds the $100 to the employee's wages and withholds income, social security, and Medicare taxes on the amount.

b) The employer adds the tips to the employee's wages and withholds income taxes, but not social security or Medicare taxes, on the amount.

c) The employer reports the $100 as allocated tips on the employee's W-2.

d) The employer adds the tips to the employee's wages and withholds social security and Medicare taxes, but not income taxes, on the amount.

e) None of the above.

Answer rating: 100% (QA)

Answer with explanation is given below As per the IRS The tips income is to be reported by t... View the full answer