You work as a tax consultant at a consultancy firm. One of your new clients has a food and beverage establishment. The establishment has increased its scale of operations recently and the number of employees of the establishment has been increased to 20. Tipping the employees is customary in the establishment. Currently, the establishment does not report any tip income in its employees Form W-2 and it wants to continue the same tradition.

Help the owner of the establishment to understand the need to report the tip income and the applicability of FICA taxes on the tip income.