I’ve never been a waitress, or in a position that regularly gets tips.
When I give a tip I think of it as a gift, and think it’s damned petty of the government to tax them.
So, when I go out to eat I sometimes tip cash, leaving it on the table, and sometimes I add it to the ticket when I pay by credit card. I imagine the latter makes it easier for the Infernal Revenue Service to grab what they regard as their share.
So if you have been a waiter do you prefer a card payment, or cash? with the latter you might be able to skim a little off, and not get taxed on it. Wouldn’t bother me, but you may not want to get involved as a tax cheat.
Long ago in a galaxy far, far away when my wife was a server (not waitress!) she preferred cash. She wasn’t worried about the IRS. She didn’t want her bosses skimminh her tips.
It’s income because the government allows tip employers to be that way. What it petty is that the government siubsidizes the tip employers at the expense of employees. However, in my state tipped employees must be paid the state minimum wage (above the fed wage) so the tips really are a bonus.
Credit card tips take a cycle or two to show up in the paycheck, and for someone making minimum wage or so, a steady flow of cash in hand makes it a lot easier to buy life’s little necessities. No amount of tips coming to you in tomorrow’s paycheck is worth anything when the car needs gas TODAY.
I do all of my tips by credit card. The way I see it, I’m doing them a favor by making it easier for them to properly complete their tax return.
(As for the definition of gift, by law there must be no exchange, or expectation of exchange, of value. The whole point of a tip is to reward good service, and your only relationship with that person is based on an exchange of value. It would be challenging to craft a law that made tips into a gift without creating a mile-wide loophole.)
From a tax standpoint…it’s not that the g’ment is stealing their money or being petty, unless you think that they’re stealing or being petty when they take tax out of your paycheck. Ask the wait staff how much they’d get, without tips, for a 40 hour work week. You’ll find that it might be something like a hundred dollars whereas the kid running the register at the gas station might say $300 (before taxes). The tips are simply part of their income.
Also, I recall walking through the backroom of a restaurant and seeing something on a bulletin board once about why you should report your tips. One of the reasons was that, should you need to go on unemployment or disability (due to a worker’s comp injury), you get paid based on what you report. For example, if you report just your base pay of, say, $125* a week and then go on unemployment, you might get $60. But if you report all your tips (lets say $100 a night) and report $525/wk, you’ll get $252/wk if you find yourself out of a job. The same idea applies to worker’s compensation.
I often tip in cash when I pay with a credit card. The waiter/waitress can do what they please with it, I really don’t care. A friend of mine said she would report something like half of the tips. Also, I don’t know if the unreported tips were just pocketed or still distributed among the rest of the staff (some restaurants distribute the tips to the non-waitstaff).
I think a lot of waitstaff pocket the tips because it’s cash, right here, not getting taxed, but don’t think about future implications…and why should they. So few of them, especially if they’re just in high school or college really need to worry about unemployment or worker’s comp (and, frankly, the employer would rather have lower wages on the books for both of those).
Also, just to reply do Duckster, in WI, minimum wage is $7.25 for non-tipped employees and $2.13 for tipped employees. I don’t know if that’s the case in your state as well, but that’s how I based my numbers.
*$100 a week was low enough that it didn’t even qualify for unemployment.
Cash. My very short time as a waiter I learned that the owner of the joint nipped me 10% of credit card tips as a “processing fee”. Hence the “very short”.
[ul]
[li]The federal minimum wage is $7.25/hour.[/li][li]The federal minimum tip wage is $2.13/hour.[/li][/ul]
So Wisconsin is paying the required fed rate.
In Washington State, the minimum wage is $9.47/hour, the highest in the nation. Period. Washington does not authorize a lower tip wage, nor can employers claim any tip credit when paying employees. So everyone (with a few defined exceptions for 14/15 year olds – and still more than the fed minimum) must be paid at least $9.47/hour.
Some localities within the state have a higher minimum wage. Seattle has a multi-year plan to raise its minimum wage to $15.00/hour. A year in ($11.00/hour come April) with the plan and there is no negative impact to business.
Long ago, when I did food service in high-school, any tip on a credit card was just given to me at the end of the shift in cash, from the cashier. Made no difference at all.
How the hell would the IRS be able to track tips on credit cards to specific staff? I guess its possible, but is this really a thing?
From what I know about casino employees, they are taxed on an “estimate” just to placate the IRS. They usually get much more than reported. Its been a long time, though. I don’t know what happens these days.
The idea is that if you’re paid in cash, the money (all or some of it) can just be put in your pocket and no one’s the wiser.
If it’s paid by credit card, typically, whoever does the payroll would add it to your paycheck. It would be deposited into their bank account and then make it onto your paycheck the next time you get paid.
They way it was handled at your restaurant sounds like an anomaly.
Look at it this way, even with that system, if you got paid in cash, you could put it in your pocket, but when you got paid by CC, you had to ‘redeem it’ which (at least in theory) gave the employer a chance to keep track of who got what tips and report it to the IRS.
Keep in mind, it really only increases the employer’s taxes and insurance rates, so it’s not like they’re going to beg you over and over to report cash tips, but if all their servers report no tips…well, the IRS and insurance companies aren’t dumb. Assuming they’re not skimming anything off the top, they only benefit they have for reporting tips is keeping the IRS off their back for essentially paying employees under the table.
Cash. Always cash. I don’t care what they do with it, it doesn’t matter that I’ve paid for the meal/haircut/carwash with a card, the server always gets cash.
Back when I was young and poor, having a couple of extra dollars at the end of my shift made the difference between sleeping in a warm motel room and getting a shower instead of sleeping in my car and taking a whore’s bath at the gas station before I had to get up and do it all over again.
Sure it’s a thing. The restaurant has a record of server sales, and of credit card tips by server. At the end of the shift, staff is supposed to report cash tips. This gets added to your cc tips and your wages when the restaurant reports your income to the IRS. You get taxed on your reported tips or 8% of your sales, whichever number is higher. I’ve worked in places with handwritten tickets and a manual time clock, where you wrote your cash tips for the night on the back of your time card, and I’ve worked in places with computerized order systems and time clocks, where when you clocked out the computer showed you your sales for the shift and your credit card tips, then had you enter your cash tips before you could finish clocking out. At either sort of place, we always got credit card tips in cash at the end of the shift.
The IRS isn’t doing the tracking specifically. Because the tips were run through the CC machine and paid to you from the register, the employer knows exactly how much was paid through to you, and they report it as part of your W-2. The employer has an incentive to do this right; not only can they audited on it, but they get a tax credit for some of the tax on tips.
Cash tips, on the other hand, may not be seen by the employer at all. Employees have a form that they should use to report if they got cash tips over $20 in a month. The employer would then use that to report it on the W-2, but if you take all the cash tips and report only a fraction of them, then that’s all that gets put on the W-2.
Which leads to…
… allocated tips.
The IRS can require the employer to report at least x% of sales as tips when the amounts the restaurant/employees are self-reporting is so low that they’re obviously not reporting all of it.
These days, the only time I tip in cash is when we get a pizza delivered. We use plastic for everything else - it’s an easy way for me to manage our budget. Plus I don’t have to worry about someone other than the server pocketing the tip. I don’t know if or how often that happens, but I expect for some folks, seeing a $5 bill sitting on a table within easy reach on the way out the door… :dubious:
My sister is a bartender and I know she prefers cash money. I’m going to ask her how credit card tips are handled. I know she tips in cash - lots of $1s!
I almost invariably tip on plastic, because I rarely use cash, but will increase the tip by 10%, (relative, not absolute), so that an 18% tip goes to 19.8%. It’s because of the tax, and because sometimes employers will decrease tips by the amount of hold back the credit card companies charge. I know they’d prefer cash, but I’m not going through the hassle of carrying a bunch of paper around for that.
I usually pay in cash, if I have it on hand. If I don’t, I’ll leave it on the credit card.
I like how one of the local salons does it. They give you a credit card statement to sign, including a line for the tip. Then they give you the tip amount back to you, in cash, along with a little envelope that you can write the hairdresser/manicurist/masseuse’s name on it. Once complete, you put the little envelope in a locked box, and the tips are (presumably) distributed to the employee before the end of their shift.
If you really want to dazzle and impress your server add $2-5 tip onto the credit card receipt, then leave the rest in cash!
Most often the slice the house demands in kickback is based on an average of the CC receipts, then applied to total sales. So, a small tip on the CC reduces the houses kickback, while the bigger portion they get in cash that night! (And they get to keep it all!)
They cannot fail but be impressed by how very savvy you are!
(But it needs to be said, however you choose to tip, the server appreciates it, I promise!)