Did you mean that you’d never heard it twice?
A quick re-read of the thread, I still don’t see anywhere earlier saying that servers must report all tips to management based on IRS rules and get tax deducted for them. Frankly, that’s brand new information, I have never heard of it before, once, or twice, or ever. Interesting. Thanks, Dracoi.
As I said, in Canada, servers self-report at tax time. Oddly enough, this seems to lead to underreporting. I can only conclude that Canadian servers are bad at math and I should double-check all my bills.
A tip is income from work, but not income from the employer, so the employer does not have to deal with any tax issues for tips. As a side effect, the amount cannot be calculated as part of income, minimum wage still applies.
As I said, then each server should take home roughly what they made in tips (in addition to minimum wage). Everything should even out in the long run.
So either Mama misunderstood, her daughter misspoke the details, daughter works during “really good tip time”, and is subsidizing other hours, or the math did not work out to 10 each at 10%…
I think the most fair method would be to allow the specific employee to receive the specific tip given. I like to tip but are reluctant to contribute to a tip jar or some kind of pool. When I tip I I try to assure (by asking) that the tip - all of it - will go directly to the person serving me. They are inspiring the tip, and how much over the usual 15 percent I would tip at a restaurant.
I recently had exceptional service at a fastfood drive through, and before driving away with my order asked the person “can I give you a tip?” They said sure so I gave them 5 dollars, which was approx 50% of the price of the order. I would not have given any tip if my understanding was that the tip would be put into some kind of pool or general fund to distribute to all the employees. That is not fair. Some people are especially presentable, some not so much. I see this all the time. There is a reason that some employees generally receive greater tips than their coworkers. Those people are averaging more tips because they essentially make the customer happier, more satisfied with the service. This system may have flaws but to me seems the most fair.
I also realize that this opinion of my ideal is not always practical, and may not be practical in this case. Just wanted to give this opinion though, that I think ideally the person who inspired any given tip should be allowed to keep the whole thing, and take their own responsibility for reporting this to the irs or not. It should not be any of the owner’s business to handle the tips.
That’s why I always place the bill(s) directly down her blouse.
The deli in question is not full service, they simply deliver the food to the table when it is done. Orders are taken at the counter. These tips should be pooled, cash reciepts should be time stamped and all orders taken durring the employees hours should be divided equally with none going to the owner. If the owner has adult children or relatives they should be included in the tip pool.
I guess I did not do a good job of explaining how things work here. Let me try again.
Customers order and pay for their food at the counter. Better than 98% of the tips are received at this time, either in the tip jar or added to the credit card payment. So, before they get their food. Our tips average 6% of our sales. Very rarely, we will have a tip just left on the table.
We are open from 8ish until 3ish. For the better part of the day, it is just my husband and myself. I take the order, collect the money and deliver the food and the whole shebang. Currently we have four people that come in and help us from 11:30 to 1:30. I did a recap of sales by the hour and we do about 60% of our business during the 2 hours we have help. The other 40% is spread out during the rest of the day when it’s just my husband and myself.
So when it isn’t just me up front, we all rotate from the register to the tables. We all serve, ring up, clean tables, etc. No one has assigned tables. So unless it’s just me, the customer doesn’t know who will bring him his food at the time that he is leaving a tip.
So, because of the way tips are received, I just receipt all the tips in as income. Then everyone gets 10% of that total. So, they get 10% of tips received even when they aren’t there. Even if they have the day off, they still get 10% of the days tips.
I thought this seemed fair and for what it’s worth, my other employees are fine with this arrangement. I do pay this through payroll, so taxes are being paid by me and I never skim off any tips.
Is that more clear? I was mostly just trying to simplify the accounting when I set it up this way.
You honestly believe that it’s fair to give people a portion of tips earned when they don’t work?
Here’s an idea, how about you clear the tip jar when the first of your non-family staff starts their shift, that’s for you, put it in your pocket. Then at the end of the regular staff shift let them split up the cash in the tip jar and take it home with them. That way everyone gets their fair share of the tips for the shifts they work and you don’t have to give your tips up to shift workers who are there less hours than you over the course of the day. Everyone deals with the IRS just like all servers do by estimating and claiming their tips. Because it really sounds like the issue here is that you think you deserve a share of the tips and this is how you’re getting it. I can tell that you’re trying to do the fair thing here, but as my mother used to say fair and equal are often different things.
The way I see it it’s not just about workers getting a share of tips when they weren’t working, but that none of your staff gets their full share of tips on days when they do work. If someone works more than 10% of the shifts but only gets 10% of the tips they’re getting screwed.
Very good idea! Hopefully California doesn’t have a rule against that.
So 4 servers share 40% of the tips. Perhaps averaging by month or week rather than day or shift is acceptable. Part of the problem is the tips are paid at the register before the customer “belongs” to any server.
You have to decide what’s fair - split equally or split by hours. Your answer lies somewhere in between, and does not seem fair by either choice. You are taking 60% minus taxes (I assume) for two of you?
I’m not understanding - Dracoi says all tips are reported daily to the employer by IRS law, moejoe implies servers handle reporting their own tips - which is it?
Moejoe is right. Fairest is to keep separate owner and non-owner times, and split the non-owner tips among the other employees by hours worked. The longer the average, the more evened out. Maybe each week…
If its a pain to separate credit tips, then pool all tips, but include the owners in the hourly calculations. But… Giving yourself more than the others seems unfair. How it is calculated has to be clear and fair and equal for everyone. 10 for you 60 for me does not seem fair.
Both- employees who receive more than $20 in tips for a calendar month are supposed to report it to their employer and the employer is supposed to include it on the W2 and withhold taxes on it (which in states other than California can result in a paycheck of $0). But all tips are income, and each individual is required to report all income on the tax return - so if a McDonald's employee gets a $10 tip for a birthday party once a month, it would not be reported to the employer, but should be reported on the tax return.
Here’s an example of how it works in a more standard restaurant:
$500 in tips were paid on credit cards, using the line on the receipt for tips. These are obviously collected by the employer through their merchant service. Thus, the employer already knows this amount, and they know how it gets paid out (whether a pooled system or a system that pays directly to employees).
$500 in tips were paid in cash and the server stuck these in a jar, to be divided up later. Two employees count the cash, record the total and record the amount split with each employee. The employer gets a report showing the amounts received and paid. (Alternatively, each employee prepares their own form at month-end to report tips received. This isn’t all that common.)
$50 in tips were paid in cash and the servers did not put this in the jar. They’ll need to fill out a form at the end of the month to let their employer know they received the tips (this is the best-practice that fully complies with all rules). Or, they’ll need to fill out a form and report it to the IRS at year-end (while this doesn’t fully comply with all rules, the IRS still gets their money in the end). Or they keep the money and don’t report it all (common, but illegal).
If managers or owners, even if they are working a shift, are taking a cut of the tips, you are stealing from your employees, in my mind. Not that restaurants don’t routinely get away with much worse, they do.
Don’t do this, it is never, ever worth the small amount of money you’re putting in your pocket. It costs you large to two very important ways. Firstly it will take no time for this fact to circulate in the industry where your operate. Once it does, you will find it very difficult to attract the best wait staff. So so staff, love this kind of set up, the star servers hate it. And secondly, your servers are, in so many ways your partners, you do not want them to feel poorly used. Ever. You are giving them leave to drink your booze, give your product away, and bend all the rules, because they will feel exploited. It’s a really hard thing to turn around once it sets in. Be aware.
Both of these issues have the potential to destroy your business, it really doesn’t take much in a small restaurant/deli. It will never be worth, whatever you’re making in tips, in the long run. Resist the urge!
Paging Diosabelissima who I am pretty sure should have some insight on the legalities of this.
My only thoughts on this is this is not a standard tip driven full service restaraunt situation. There is no indivdualized service who rings you up, who makes your food, and who brings it to you are all luck of the draw and will most likely be different people. Its a hybrid situation calling for some further consideration.
Should the owners be getting 60% of the tips…no
should they be getting something considering they do provide 100% of the service for 40% of the working day…yes.
I understand why you’d think that. But you’d be wrong. Owners and managers should, never, ever, be part of the tip pool. It’s bad business. And the small amount of money involved will never be worth, what it will end up costing the business, in the long run. It will only make your staff feel ill used. That will end up costing you far more, believe me.
In a small business goodwill of your staff can prove to be the difference between success and failure.
It’s a rookie mistake that an experienced restaurateur would never make, in my opinion.
The pizza place I worked at did something similar but it was just all tips into the jar, split equally among everyone on duty, manager on duty was included in this and nobody thought twice about it.
This sounds more like, they save it up for a week, then a manager, (who wants a cut!), divides it up according to; Hours? Number of shifts? Number of busy shifts?
It’s a recipe for disaster. There is no conceivable way that the ‘others’ are going to believe it is being fairly done, in my opinion.
The CA law seems pretty clear that the house shouldn’t be keeping ANY of the tip money and does not provide different rules for “tip bucket” type scenarios. This may mean a little less profit for the business, but hopefully happier, more faithful employees.