How likely is a tipped employee to get audited?

Question

I would just like to say that I am very religious and reported every penny of the tips I made.... BUT my friend is thinking about not reporting all of his tips this year. What is the likelyhood that he will get audited for this? He only works part time so he didn't make all that much money in 2006. He gets minimum wage by his workplace plus about twice the hourly wage in cash.

Answer 1

People who work in service industries that typically receive tips are about 5 times as likely to be audited as someone who does not work in a commonly tipped position. The odds are still in your favor but are getting big enough that you'd be taking a measureable risk by not reporting all tip income.

Your employer has to report tip percentages based upon what is reported by their employees. If your employer's percentages are low for the type of business, all of his employees are much more likely to be audited. Any employee whose percentages were off from the average for the industry and / or the employer is also much more likely to be audited.

Answer 2

Tipped employees are somewhat more likely to get audited than others, since it's no secret to the IRS that's a place where a lot of cheating goes on.

Answer 3

It's just as likely as anybody else...when the IRS audits they usually check the file and see if anything looks amiss....if there are no red flags, they put the file back....however, if there are a lot of red flags and things look suspicious then they will do a full fledged audit and you friend may get in a lot of trouble.