Payroll Fraud

This is not a credit issue, however, I thought that with all the knoweledge at this site, someone might be able to give me some answers or point me in the right direction.

I know someone who works in a restaurant and is a waiter. Every other week he has to fill out a time card and report the tips he makes daily.

The owners son, who is the manager, always questions him regarding the tips he said he makes and then changes the amount (sometimes doubling the amount) which is what is reported on his paycheck which for him becomes taxable income. (which he has not made)

The other side of this situation, is that he has worked there for about 8 years and makes decent money. However, I know for a fact that the restuarant pays all the kitchen help in cash, has many relatives working for them who also get cash and that their W-2's state that they only made $10,000 last year when they were being paid about $1,000 weekly! ( I helped them fill out their tax returns) What a joke!

He does not want to make trouble for the restaurant because he knows they will fire However, I know they are breaking the law and I feel he is paying taxes for wages he is not receiving.

Not sure what to do. How does he report this without being involved? Any ideas?

.... by increasing on paper the amount of tips he is receiving. if it's putting additional tax burden on him, he should ask them to stop. if they won't stop, fire, or threaten to fire, it's time to visit the irs criminal investigation people. he should document as much as possible. the irs also pays whistleblowers a percentage of what is recovered, depending upon the circumstances. nobody should be paying income tax on money they never earned.

I think there is an IRS regulation that requires a minum percentage to be declared as tips, 8%?

If that's not the reason, then I really don't understand it. Like Doug said, they have nothing to gain, in fact increase THEIR payroll taxes too.