If you receive more than $20 in a month in tips, all these tips count as income that you must report and pay taxes on. That includes your cash tips, your charge-card tips, and any tips you get from other employees, minus what you tip out to others. You may have heard all you need to do is report tips equal to 8% of sales, or 10%, or just your charge-card tips. However, this is incorrect: the law requires employees to report and pay taxes on 100% of the tips they keep after tip-outs. The 8% figure is simply a threshold below which many employers must allocate tips on your behalf for tax purposes and report certain additional information to the IRS. The IRS can use this information to flag restaurants where employees may be underreporting tips.