# tipping changed to gifting **URL:** \ **Category:** Factual Questions\ **Created:** [April 25, 2017, 12:52pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204 "2017-04-25T12:52:37Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![edwardcoast](https://avatars.discourse-cdn.com/v4/letter/e/cab0a1/32.png) [@edwardcoast](https://boards.straightdope.com/u/edwardcoast)\ **Post date:** [April 26, 2017, 3:10am UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/21 "2017-04-26T03:10:28Z")
> [@crucible](#): > > just saw something about this, and I imagine it has been covered on SDMB, but a search doesn’t pick it up… > > There is a small, growing movement, to mark the contribution to the waitstaff credit card slips at restaurants as being ‘GIFT – not a TIP’. Gifts, of course, are not taxable, tips are. Most waitstaff pocket cash tips and usually don’t claim them fully on their state or federal tax returns, anyway, but, what the heck, would some documentation of ‘gifts’ offset taxes? god knows they make too little already. If someone is performing a service or providing goods in exchange for money, the money can’t be considered a “gift”. It is a tip or a wage. As for employers acting like they are helping the staff by only telling them to claim the tips to not exceed minimum wage, that’s just plain wrong. Because it hurts the employee, because the employee and the employer are not paying into FICA (Social Security). The impact of this, is that it reduces the social security benefit when you go to retire. It may also reduce what you can collect on unemployment because you were reporting your salary was lower by not including the tips. There are other things you could be missing out on by under reporting income, that when you go to get a loan they need your documented income which would be on your W2. If most of your tips aren’t on the W2, you are going to have a much lower gross amount. If you feel so bad about the tips you leave, then leave a higher tip, but don’t play games or try to talk to the staff into accepting it as a “gift” it only hurts them. The employer likes it because they don’t have to pay as much into FICA. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [April 26, 2017, 4:31am UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/22 "2017-04-26T04:31:28Z")
> [@Riemann](#): > > [Even Shakespeare](https://en.wikipedia.org/wiki/A_rose_by_any_other_name_would_smell_as_sweet) realized that this wouldn’t fly with the IRS. Or Mark Twain: “How many legs does a dog have if we call the tail a leg too?” “Five?” “No, four. Calling a tail a leg doesn’t make it one…” > [@DCnDC](#): > > The IRS’s definition of “gift” is: > > > [@](#): > > > > \*\*Originally Posted by IRS FAQ \*\* > > Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return. > > [Frequently Asked Questions on Gift Taxes | Internal Revenue Service](https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes) > > Pretty sure they can see through these sorts of semantic games. So basically a “tip” given to a crappy waiter is a gift, plain and simple. (which seems about right) So you write on the bill, “You don’t deserve a tip, this is a gift plain and simple - nontaxable, too”. ---
**Author:** ![crucible](https://avatars.discourse-cdn.com/v4/letter/c/5f8ce5/32.png) [@crucible](https://boards.straightdope.com/u/crucible)\ **Post date:** [April 26, 2017, 12:05pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/23 "2017-04-26T12:05:55Z")
So, one school of thought says that anything of value given to a person who does something for you is taxable income. Is that a fair statement? If so, I counter by noting that even if you don’t give a gratuity, your service is likely to be pretty much the same. There is actually no compulsion on my part to pay a tip. So, no compulsion, no contract, no obligation…the fact is, anything I give a waitperson to show my appreciation is simply a gift. Aren’t there restaurants where tipping is discouraged? Where the owner posts a sign saying “we pay our staff a living wage and that cost is included in the cost of your food. Please don’t tip.” ---
**Author:** ![crucible](https://avatars.discourse-cdn.com/v4/letter/c/5f8ce5/32.png) [@crucible](https://boards.straightdope.com/u/crucible)\ **Post date:** [April 26, 2017, 12:07pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/24 "2017-04-26T12:07:45Z")
Or, you are moving and some of your friends come around with their pickups and help you transfer your goods from one domicile to another. After, you buy everyone a nice dinner to show your appreciation. Is the value of that dinner taxable income for the recipients? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 26, 2017, 12:08pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/25 "2017-04-26T12:08:51Z")
The only “school of thought” that matters here is the IRS and they disagree. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [April 26, 2017, 12:34pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/26 "2017-04-26T12:34:03Z")
> [@](#): > > Or, you are moving and some of your friends come around with their pickups and help you transfer your goods from one domicile to another. After, you buy everyone a nice dinner to show your appreciation. Is the value of that dinner taxable income for the recipients? Technically, yes, though in practice even the IRS isn’t going to worry about such piddling amounts. But they have to have the rules to deal with more extreme cases of the same sort of thing. There have been communities, for instance, which stopped using money entirely (or, more often, made up their own system of money), in an attempt to get around paying taxes. It didn’t work. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [April 26, 2017, 12:34pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/27 "2017-04-26T12:34:39Z")
> [@Common\_Tater](#): > > Maybe we need to get away from the notion that anyone should have to pay tax when they make $3 an hour. It’s just insane. They don’t make $3 an hour. They make at least the federal or state minimum wage, whichever is higher. They also probably don’t pay any federal income taxes, like the other roughly 46% of the population who also don’t. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [April 26, 2017, 12:44pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/28 "2017-04-26T12:44:13Z")
> [@crucible](#): > > So, one school of thought says that anything of value given to a person who does something for you is taxable income. Is that a fair statement? As a matter of fact, it is not a fair statement. The IRS has loads of examples of things of value given to another person that are not income. I mean, loads and loads and loads. It’s a profoundly wrong statement. ---
**Author:** ![DSYoungEsq](https://avatars.discourse-cdn.com/v4/letter/d/c6cbf5/32.png) [@DSYoungEsq](https://boards.straightdope.com/u/DSYoungEsq)\ **Post date:** [April 26, 2017, 2:47pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/29 "2017-04-26T14:47:56Z")
> [@Ravenman](#): > > As a matter of fact, it is not a fair statement. The IRS has loads of examples of things of value given to another person that are not income. I mean, loads and loads and loads. It’s a profoundly wrong statement. It’s not “profoundly wrong” if the person gives something to another person “_who does something for you_” (emphasis added), if we assume that was meant to link the giving to the doing. Indeed, the basic definition of income for the purpose of the IRS is anything received. There are certain things you can receive that aren’t considered income for the purposes of income tax; gifts are included in that list of exceptions (though there are exceptions to the exceptions). If you are receiving something that is linked to something you do for that person, the general rule is that the IRS will consider that income. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [April 26, 2017, 2:48pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/30 "2017-04-26T14:48:12Z")
> [@crucible](#): > > You see a story almost every day about some benefactor who leaves a huge ‘tip’ for a struggling waitress, sometimes hundreds or a thousand bucks. Surely, that sort of thing has to be called a ‘gift’, right? > > Frankly, too, many of us frequent the same restaurants and know many of the wait staff, their family ties, their medical issues, even. Why wouldn’t we want to ‘gift’ a bit of money to help out? Not for service, but for friendship? If it is a huge amount of money, then it would be best that it be given specifically as a gift outside of the establishment. Not only does the IRS care, but the employer should too. Remember, if you are doing it on a credit card, the employer has to pay somewhere around 3% to process that card, then pay their share of payroll tax, meaning that the employer is generally on the hook for about 10% of what you tip. Drop a thousand dollar tip on your server, and you just cost the business $100. > [@DrCube](#): > > Legal or no, I can assure you that very few tipped employees claim cash tips on their taxes. > > One anecdote, take it for what it’s worth: When I worked at Pizza Hut, back when it was a sit-down restaurant and didn’t take credit cards, our boss told the wait staff to claim only the tips it took to get them up to minimum wage (because the employer is on the hook for that if the tips don’t cover it). Then pocket the rest. There was even a handy feature on the computer that would calculate that for you. So everyone would claim ~$3/hour in tips (because minimum wage was $5.15 and waiter wage was $2.39). Everything above that was under the table. > > I only worked that one job, but I’ve known and spoken to a lot of tipped employees over the years and they tell me it works the same in every job they had. Credit and debit cards have put quite a damper on that, sure, but it still works that way for cash tips. So if you want your server to avoid taxes, tip in cash. I’ve yet to hear of the IRS cracking down on this or auditing minimum wage earners. Most servers I worked with tended to declare 10% of their sales in tips. 8% being the minimum, so 2% for padding, and because 10% is an easy number to calculate. This is not to say that that is what the IRs would like, but you can probably get away with it. > [@D\_Anconia](#): > > They don’t make $3 an hour. They make at least the federal or state minimum wage, whichever is higher. > > They also probably don’t pay any federal income taxes, like the other roughly 46% of the population who also don’t. First, they are definitely paying payroll taxes, and as most states are less progressive on their income taxes than the fed, they are very likely paying state taxes, so even if they are not paying federal taxes, they most certainly are still getting a portion of their tips withheld. Also, most of the 46% of the population who do not pay taxes are minors, retirees, and the disabled. Unless they are making less than $10,350 a year as an individual, or somewhat more if married or with children, they most certainly are in the 54% of those who pay federal taxes. Just the fact that they are not a child, not retired, and not disabled, and you know, actually working means that it is quite likely that if you make an assumption that they do not pay taxes, you are going to be wrong most of the time. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [April 26, 2017, 3:27pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/31 "2017-04-26T15:27:56Z")
> [@k9bfriender](#): > > First, they are definitely paying payroll taxes, and as most states are less progressive on their income taxes than the fed, they are very likely paying state taxes, so even if they are not paying federal taxes, they most certainly are still getting a portion of their tips withheld. First, that’s why I said federal income taxes, not payroll taxes nor state income taxes. Also, income tax withholding is not the same thing as paying taxes, due to the existence of exemptions, deductions, and credits. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [April 26, 2017, 3:55pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/32 "2017-04-26T15:55:50Z")
> [@D\_Anconia](#): > > First, that’s why I said federal income taxes, not payroll taxes nor state income taxes. Yes, but, while the OP does specify fed taxes, those are not the only taxes that they are responsible for properly declaring, which is relevant to the thread. > [@](#): > > Also, income tax withholding is not the same thing as paying taxes, due to the existence of exemptions, deductions, and credits. I said nothing about withholding. I spoke specifically about taxes. Your 46% is of mostly non-working individuals. The fact that the server is working makes it actually far more likely than not that they are paying federal taxes. Exemptions, deductions and credits should already be loosely built into the declarations on the w-4 in the first place. ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [April 26, 2017, 4:10pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/33 "2017-04-26T16:10:40Z")
> [@John\_Mace](#): > > The only “school of thought” that matters here is the IRS Indeed. “I’ve thought of a cute way to re-categorize my payment so it magically becomes non-taxable” is likely to receive about the same respect from the IRS as do those “Sovereign Citizen” arguments. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [April 26, 2017, 4:17pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/34 "2017-04-26T16:17:17Z")
> [@DSYoungEsq](#): > > It’s not “profoundly wrong” if the person gives something to another person “_who does something for you_” (emphasis added)… Well, sure, now that you add emphasis to his sentence, I see how I am the one who is profoundly wrong! Seriously, I totally misread that sentence and I apologize for a blatant error on my part. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [April 26, 2017, 4:43pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/35 "2017-04-26T16:43:06Z")
> [@kayaker](#): > > Heh, trying to duplicate this; I misspelled conscience and it corrected to conscious. Although if the waitperson is conscious, they will most likely pocket the cash.😃 And why not, you clearly stated above that you wrote in $0 for a tip, so the money you left must be a gift. Actually I don’t seen any conscience conflict here, the money is clearly intended for them. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [April 26, 2017, 4:47pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/36 "2017-04-26T16:47:11Z")
> [@k9bfriender](#): > > I said nothing about withholding. You didn’t? > [@](#): > > First, they are definitely paying payroll taxes, and as most states are less progressive on their income taxes than the fed, they are very likely paying state taxes, so even if they are not paying federal taxes, **they most certainly are still getting a portion of their tips withheld.** > [@](#): > > Exemptions, deductions and credits should already be loosely built into the declarations on the w-4 in the first place. I thought GQ was for factual answers, not about what “should be”. ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [April 26, 2017, 5:04pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/37 "2017-04-26T17:04:19Z")
> [@D\_Anconia](#): > > You didn’t? My apologies, I did in fact use that word, but in a different context than you are trying to imply. I was using it to refer to at the very least payroll and state taxes, and most likely federal taxes, that are not given to the server to cover their taxes, you seem to be thinking I meant that it was withheld for them to all get back. But I am not sure what your point is. Is it your thinking that they pay it all at the end of the year? The wages that are withheld are not all returned to them. They do in fact pay federal taxes. Do you have any reason to believe that servers are not paying fed taxes? I get if they are college students or some such, but most servers have the job as their primary profession, and do in fact pay federal income tax. > [@](#): > > I thought GQ was for factual answers, not about what “should be”. Good point, though speculations aren’t exactly GQ either, especially when the speculations are certainly wrong. > [@D'Aconia](#): > > They also probably don’t pay any federal income taxes, My point there is that they should have their w-4 filled out appropriately so that when they do their taxes, they will have a good estimate, and not owe or be owed much, and when I say “should” there, I mean that that is best practices, not some sort of speculation, like that they don’t pay fed taxes. ---
**Author:** ![DCnDC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dcndc/32/2842_2.png) [@DCnDC](https://boards.straightdope.com/u/DCnDC)\ **Post date:** [April 26, 2017, 5:17pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/38 "2017-04-26T17:17:28Z")
> [@md2000](#): > > So basically a “tip” given to a crappy waiter is a gift, plain and simple. > (which seems about right) > > So you write on the bill, “You don’t deserve a tip, this is a gift plain and simple - nontaxable, too”. “Any transfer” seems to me obliterates any possible ambiguity. Nowhere in there do they mention the anyone’s _intent_. I’m certain they don’t care about the intent. Again, semantic games. > [@crucible](#): > > If so, I counter by noting that even if you don’t give a gratuity, your service is likely to be pretty much the same. There is actually no compulsion on my part to pay a tip. So, no compulsion, no contract, no obligation…the fact is, anything I give a waitperson to show my appreciation is simply a gift. Okay. So, would you give this server, most likely a complete stranger to you, money if they had not served you at all? Let’s say you’re not even eating, you just walk into a random restaurant, hand cash to a random employee, and walk out? If you’ve never done that, and no one else has ever done that, as a matter of routine, then it can’t work the other way either. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [April 26, 2017, 5:20pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/39 "2017-04-26T17:20:54Z")
> [@John\_Mace](#): > > The only “school of thought” that matters here is the IRS and they disagree. Here it so obviously wouldn’t work it doesn’t matter whose ‘school of thought’ counts. But in the US it’s really the federal courts’ ‘school of thought’ that counts. In some other countries the tax authorities have more authority to determine what their rules mean than the IRS does. The IRS has to win in court if challenged. Which in this case they certainly would. Just because a specific payment isn’t specified for the service in a restaurant doesn’t mean the tip isn’t for the service, which it obviously is. In general though not 100% of the time, tax court cases follow common sense and back up the IRS in rejecting obvious tax dodges with no other purpose, which is what this would be. But the IRS loses in court, not that infrequently, on stuff that’s harder to call. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [April 26, 2017, 5:29pm UTC](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204/40 "2017-04-26T17:29:35Z")
> [@k9bfriender](#): > > The wages that are withheld are not all returned to them. Federal income taxes are returned, via a refund, if the AGI is less than a certain amount. > [@](#): > > I get if they are college students or some such, **but most servers have the job as their primary profession,** and do in fact pay federal income tax. Do you have a cite for that? [Previous page](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204.md?page=1) [Next page](https://boards.straightdope.com/t/tipping-changed-to-gifting/785204.md?page=3)