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I have never worked in the Restaurant /bar industry and have no clue how this works.
I am asking because of a family member , and I will keep it brief.
Do you report tips to the IRS and how does this work? (cash tips)
if you are a waiter/waitress/bartender/barback?
I realize this may be slightly different in lets say a corner Bar/Restaurant and a Corporate type one.
Does your employer inform the IRS or do you just get surprised at end of the year?
Is it different in NY state than Texas lets say?
Thanks... I know its a lot of questions but i have always worked in the healthcare industry for the most part and I have no clue as to how to advise my family member. They just began working in this industry and before this becomes monumental I figured i would ask people who were more familiar.
I did try googling this but nothing felt relevant.
I appreciate any input a head of time.
Thanks
The official answer is Yes you are supposed to report ALL income on your tax form whether it is included on your W-2 or not. In most cases the tips you get in cash will not be recorded anywhere. If you get tips via a credit card it will have come through the businesses books and will show up somewhere.
In Reality most food business people I have known reported some of their tips. All the ones that could be tracked (credit card, etc) and a 'reasonable' amount of the cash ones. It comes down to 'How honest are you and how lucky do you feel?'
I haven't worked a tipped job in years, but, at the end of the shift we were asked how much we received in tips and some type of junior manager entered that into the computer along with our hours worked.
As other posters have noted, yes you are supposed to report all tipped income, yet the reality is many people under-report.
A lot of how this is addressed depends upon your state. Back when I was waiting tables the restaurant had to report my food/drink sales and the state assumed that I had received tips equal to 7% of that amount.
So, if I sold $500 worth of food, it was assumed that I had earned $35 in tips. Tax withholding and FICA where based on this. The end result is that my paycheck, based upon the server wage of $2.01/hour at the time, usually came to about $2.00 for the week.
At the end of the year I received a tax document listing my wages based upon the 7% for my tax returns. This meant that I did not really owe an income tax bill, as it had been withheld throughout the year and I did not earn much.
As always with his type of thing, don't take the word of some random guy on the Internet, talk to an expert in your area.
I haven't done this in a while either, but the rule of thumb I was given was 8% of sales was a safe number, and just like the poster above me reported, it gets entered after every shift when you cash out.
Ask people in your state that work in places similar to what you are targeting and they will tell you how it's done.
I did try googling this but nothing felt relevant.
I appreciate any input a head of time.
Thanks
Oh. So you either don't know how to use the Internet, or we're just hoping to get an answer for your "relative" that didn't say "yes, you have to pay taxes"?
If you get tipped by computer, or have a "collective" tip like at Starbucks, it is safe to assume that your tips will get reported to the IRS or at least kept a record of so that you really should declare them.
However, if you're a waiter or busboy your tip is easily pocketed, which leads to underreporting.
Personally I'm OK with people not reporting their full tip. Majority of those folks don't get paid even minimum wage.
Roadwarrior , not everyone is savy when it comes to this stuff. And I am an RN . We were voted the most trusted profession. I am very honest and have integrity in all that I do but have never worked in this business before.
My son just was hired and he never has either.Since he has " special needs" I thought I would try to find out before it gets ahead of us.
Please don't be condescending or immediately judge my intentions without knowing me. You have no idea what path I have had in my life .
For everyone else.. Thank you. I will ask my Accountant. It was the weekend so I thought I would post and ask everyone because overall this site city-data has always been so helpful.
Who knows if my son will even remain in this job. Working 11 hours straight without a break is also against the law.
If you get tipped by computer, or have a "collective" tip like at Starbucks, it is safe to assume that your tips will get reported to the IRS or at least kept a record of so that you really should declare them.
However, if you're a waiter or busboy your tip is easily pocketed, which leads to underreporting.
Personally I'm OK with people not reporting their full tip. Majority of those folks don't get paid even minimum wage.
Um yeah they do. Most waitresses earn at least $15-20 an hour. This ladies and gentlemen is why you don't listen to people on the Internet.
Roadwarrior , not everyone is savy when it comes to this stuff. And I am an RN . We were voted the most trusted profession. I am very honest and have integrity in all that I do but have never worked in this business before.
My son just was hired and he never has either.Since he has " special needs" I thought I would try to find out before it gets ahead of us.
Please don't be condescending or immediately judge my intentions without knowing me. You have no idea what path I have had in my life .
For everyone else.. Thank you. I will ask my Accountant. It was the weekend so I thought I would post and ask everyone because overall this site city-data has always been so helpful.
Who knows if my son will even remain in this job. Working 11 hours straight without a break is also against the law.
I'm judging your intention and your question based on the fact that searching the term "reporting tips" returns a minimum of 4 articles and one video from the IRS that is exceptionally clear on how this is handled by both the employer and employee. So, when you say "nothing felt relevant" - sorry, but when the search results aren't just relevant - but are totally exact - that just calls into question your intent.
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