You must report tips to your employer so that:

Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes.

Can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family’s benefits if you die). 

You can avoid the penalty for not reporting tips to your employer. 

Report only cash, check, and debit and credit card tips you receive. If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Do not report to your employer any portion of the tips you receive that you pass on to other employees. However, you must report tips you receive from other employees. Do not report the value of any noncash tips, such as tickets or passes, to your employer. You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips.