Which of the following statements regarding tip income is true? A. If the taxpayer is an indirectly tipped employee (for example, a busser or bartender) he or she is not required to report tips to an employer B. Any tips the taxpayer reported to an employer are to be included in the wages in box 1 (Wages, tips, other compensation) of his or her Form W-2 C. If the only tips a taxpayer receives in a month are charged tips (for example, credit and debit card charges) distributed to him or her by an employer, he or she is not required to report these tips to the employer D. If the only tips a taxpayer receives in a month are cash tips, he or she is not required to report these tips to the employer

The correct answer is B. Any tips the taxpayer reported to an employer are to be included in the wages in box 1 (Wages, tips, other compensation) of his or her Form W-2.

Explanation:

According to the IRS, "All tips you receive, whether in cash or in merchandise, are taxable income. You must report your tips to your employer. Your employer will then include the tips on your Form W-2."

Here are some additional information about tip income:

* You must report all tips you receive, whether in cash or in merchandise, to your employer.

* Your employer will then include the tips on your Form W-2.

* You can use Form 4070 to report tips that you did not report to your employer.

* You may be able to claim a tip credit if you are a tipped employee.

* You may be able to claim a tip adjustment if you are a tipped employee who received more than $20 in tips in any month.