Final answer:
The statement that Martin needs to pay income taxes on the cash tips he received while working is true. All cash tips are considered taxable income and must be reported to the IRS on a tax return.
Step-by-step explanation:
Martin does have to pay income taxes on the cash tips he received while working his shift at the car wash. This statement is true. According to the IRS, all income, including cash tips, is taxable and must be reported on your tax return. Service industry workers like Martin are often tipped in cash, and it is their responsibility to keep a daily record of these tips to accurately report their earnings.
When you are employed and fill out a W-4 form, how you fill it out will affect the tax withholding on your paycheck. At the end of the year, all workers, including those receiving tips, are responsible for filing a tax return. This process reconciles the amount withheld with the actual tax liability. If you did not report cash tips and pay taxes on them throughout the year, you might owe money when filing your tax return.