Final answer:
Tips received by an individual at work must be included in their gross income for tax purposes as per IRS regulations.
Step-by-step explanation:
True, the tips that Matt received from patrons at the bar where he works should be included in his gross income. According to the Internal Revenue Service (IRS), all tips received by an individual in the course of their employment are considered taxable income and must be reported on their tax return. This includes tips from customers, charged tips (like those added to a credit card), and tips received from other employees through tip sharing, tip pooling, or other arrangements.
Tips are a form of compensation for services provided and therefore must be considered when calculating one's gross income. Gross income includes all income from whatever source derived, unless specifically excluded by the tax code. Therefore, employees have a legal obligation to keep track of their tip income and accurately report it to the IRS.