The Internal Revenue Service is acutely aware of the volume of tip income generated in the United States. Therefore they are shifting the compliance aspect of this income onto employers. This is a direct result of our government’s need for more revenues including Social Security and Medicare taxes.
Fior D’Italia Inc. v. United States
Fior D’Italia Inc. v. United States is a 2002 Supreme Court Case whereby a restaurant named Fior D’Italia was held responsible to collect the taxes associated with tip income from those tipped employees. In effect, it allows the IRS enforcement rights obligating restaurant owners to collect the payroll taxes from tipped employees.