Declaring Tips

[DRD140]

I am a server and want to do what is right by declaring all my tips, cash and credit cards. The place I work at, I believe, is telling me wrong (passed down from training server to new server to new server grapevine style) and I do not want to over state my tips. We have the Aloha system, but not sure what version. What I have been told to do is to take 10% of my sales and then subtract out the credit card tips and then you declare the difference to equal the 10%. If the credit card tips received for that shift equal more then 10% then you just enter 000 and basically declare nothing. I've been told that the credit card tips are automatically reported for you. So for the last couple of months I have been doing just that, but questions have been arising inside of me.

When I compare my Reported Tips on my clock out stubs to my pay stub the numbers do not match. After much searching of the Internet, I found out about the Large Restaurant rule of 8%. This make sense and my Reported Tips on my pay stub does equal 8% of sales. Now, I just received my new paycheck which includes a few shifts where I declared ALL my tips and the Reported Tips on my pay stub still totals 8% of my sales even though I reported more than 8%.

I'm not sure if all this makes sense, but my real question is: Are credit card tips automatically reported to the IRS via the W-2? Or is the amout of credit card tips received for that shift on the clock out screen purely for informational purposes only?

Please help as I am looking for some real answers.

 

[DTSMAN]

The restaurant should be reporting the tips you claim through the system to the IRS. All the major POS systems automatically know what your CC tips are because you have to enter them to get them and if they don't move those monies over to you then the restaurant is responsible for it as income. You can not go by those numbers you quoted.
In the event the restaurant was audited and they went through the books and they see you average 18% on your CC tables, then they will assume that is your tip average on all checks and back charge you for under-claiming.
That 8% thing is the rumor that you will not throw up any flags to the IRS for auditing yourself if you claim at least that, but it doesn't mean you are doing it right and then what I said above can happen.

Bo

Remember,
If the women don't find you handsome,
they should at least find you handy.
(Red Green)

http://www.redgreen.com

 

[DRD140]

I understand that the restaurant should declare to the IRS all of what I declare through the system at the end of each shift at checkout, but I believe this restaurant is only stating the 8% according to my pay stub. I will compare the numbers again when I get my next paystub which will include a full pay period where I declared 100% of my tips.

Here is the example with actual numbers from my pay stub and check out stubs. There are only three shifts included in this pay period where I decalred ALL my tips with the rest declaring how I was taught.

Sales: $3028.72 x 8% = $242.30

I reported tips for the pay period of $292.29
My charge tips were $202.46
Reported Tips (on pay stub) $242.30

Obviously, from what I can tell, the restaurant does not report my charge tips automatically and separately for me.

I would ask my GMs, but I really do not know if they know for sure. Plus, I'm too technical and anylitical for them. I have an accountant mind and everything must balance and make sense. When searching the Internet for answers, my searches kept bringing me to this web-site so that is why I'm here trying to find my answers.

The only tips the IRS knows about is the amount of "Reported Tips" shown on my pay stub. Is this correct?

I don't want to have to come up with and pay taxes on $8,000 to $10,000 worth of tips at the end of the year plus I don't want to trigger an IRS audit because I state on my Income Tax I have that much money of unreported tips.

 

[brewman52]

It appears that the restaurant is keeping you at the 8% so they do not have to pay the Additional FICA...this could come back at both you and the restaurant as underreporting..I would keep you time slips in case you need to build a case

 

[RosemarysBaby]

WOW. The ingorance of restaurateurs never seems to surprise me. You've got a bunch of issues to deal with here.

1. It sounds as if the restaurant is ignoring your reported tips and is simply putting all servers at 8% of sales when doing payroll. Stupid and illegal. Especially the stupid part because back in the early 90's, the IRS enacted (IRC 45 B Credit) whereas you, the server, can report all your tips and thus pay more FICA, but your employer matches this and gets a credit for the difference he (employer) paid above the minimum wage. Nutshell, incentive for employer to encourage full tip reporting that will cost the employee, not the employer. Unless the employer, is in the AMT area then he losses that credit (I'm there and it really bites) but that's another story.

2. Sounds like you're new to this place and you certainly don't want to get yourself fired, especially in this environment. You will have to make the decision as to what to do as far as "educating" your boss. Is he/she open minded, a restaurant vet/newbie? Believe me, one call to the local IRS office (I would never rat personally) and this would be a no-brainer. You boss is simply stupid. Again, in this environment the IRS would be more than happy to empty his pockets and you could probably get a reward. I don't condone ratting but... I just can't get that word STUPID out of my head. As DTSMAN stated, all that tip info in the Aloha system. The simplest audit will reveal it, he can't hide (stupid). If you care about this place show them this post. (Black out all the "stupids")

3. If you want to be 100% protected yourself but don't wish to rattle any cages, this is what I suggest. Claim zero dependants or add extra withholding to be taken out of your paycheck (hopefully stupid will comply with this). Then write down and track EVERYTHING tip wise. At the end of the year ante up with the IRS and simply report the difference on your 1040.

You could also call the IRS anonamously and tell them what you've stated here from the perspective that all you wish to do is the right thing. You don't want to risk lossing your job, you don't want to sue and you don't really want to rat out your employer, at least at this time. Perhaps you'll get a logical agent to help you. Good luck. If anything wierd happens let the forum know. Sometimes the technical forums could use some good gossip!

 

[RosemarysBaby]

Hey DRD
After reading your post I can see we didn't hit your exact questions exactly.

When you put your tips into Aloha, that info does not go anywhere directly without influence from your GM, bookkeeper, etc. Most restaurants will have to do some adjustments for mistakes or whatever at payroll time.

What is on your paycheck is what is reported to the IRS, period. The employer has a very specific responsibility in training all tipped personell to report everything, not the other way around. (you training them)

As myself and others here have said, keep your records, protect yourself. Also, if you have to tippout, keep track of that too and subtract that from your reported tips that you post in Aloha. Look for a line in your checkout report that says "tip refund", that's cash you're paying to the house for processing tips on credit cards. I believe you can subtract that from your tip income.

 

[DRD140]

Thanks brewman52 and RosemarysBaby. After much thought and after reading your remarks I am leaning towards agreeing with both of you. I talked privately with another server today and she also confirmed that she believes that they adjust our tips to make their books work to their advantage. "Adjusting our tips" would basically mean keeping us at the 8% mark.

I guess with the GM telling us that the credit card tips are automatically reported for us would mean that they are included in the 8% of sales.

My GM is not open minded at all. In fact if you question anything or start acting as though you are smarter than they are, you get in trouble or they want to bite your head off. I got wrote up about something stupid the other day that I feel I should have gotten a verbal first. Had I gotten the verbal first, I would have been more aware of the fact I was doing wrong. Yes, I did the thing I was accused of, but I still felt a verbal would have sufficed.

The enviroment is not really as bad as it sounds here just as long as you do your job, show up on time and not talk bad about any customers, the company or any of its employees. Most of the tension comes down from the owner to the GMs and then down to us.

Anyway, back to the topic at hand. The company has such a high turnover rate that most servers aren't there long enough to notice these numbers. In fact, most of the servers don't even keep their checkout slips to compare. I've been there three months and already the company has had about two dozen servers come and go. I really do not forsee me being there a year although I would like to be as I really need this job, they give me good hours and let me off every Sunday. I don't think I could take all the drama from our GMs plus if I keep up with declaring all my tips they will probably write me up on some stupid violation just so my honesty does not get them in trouble.

After my very first paycheck, I noticed a line that read "Tips Deemed Wages". This number is slightly lower than the "Reported Tips" line. I questioned the GM about this and he snapped that he didn't know and that I should go and ask a certain person. I seached the Internet that night and found my answer. I told him the next day that I figured it out and he proceeded to tell me what it meant.

So, I think what I will do is to figure up the amount of tips I previously have not declared and add extra to my actual tips each shift until I have completely declared all my tips up to this point. It won't hurt me at all since they will only be reporting the 8%.

One more thing that got me to thinking is that about 8 years ago, I waitressed at another restaurant that had the Aloha system and my paychecks were around $30-$40 for two weeks. I get paid twice a month and my paychecks are averaging $90-$100. This was really the first reg flag for me.

I hope I did not rattle too much, but this just lets you know what I am facing.

Just a side note: Since I will be declaring on average an extra $150-$200 a week in tips at the end of the year, I wonder, if I can count off mileage as if I were self-employeed? I'll have to ask my CPA.

 

[RosemarysBaby]

DRD
No. The milage thing won't fly. There's no deduction for commute in your case.

You say you've dealt with a GM. Is there an owner involved? Perhaps you can create an anonamous gmail address and inform the owner directly. He/she would be very interested in knowing the way the GM is operating. Or maybe not and this place will be just another statistic as so many other ignorantly run places.

You mentioned high turnover, not happening in 2009. Nobody's quitting right now. Something's wrong.

At this point, I don't know. I think I'd make that call to the IRS and tell them plain and simple that you report your tips to your employer and they under report in your check. What do I do?

Put the ball in their court. If the IRS choses to to follow up with the store then so be it. Sounds as if your boss has a cavalier attitude so let the chips fall wherever.

Above all, protect yourself. No employer wants a high maintenece trouble maker working for them especially a restaurant. I'm certainly not saying that's what you are, I'm saying that's the perspective. I run my place with a staff of over 50 totally legit. But I wouldn't hesitate to weed out a trouble maker. But the difference between me and your boss is I make my servers report full wages and I write them up if I suspect they under report. I wrote up 3 last pay period. One quit because of it and that's fine. I don't leave myself vulnerable as your boss does.

I've never sued anyone, but if you record keep as you're saying and you get fired, consult an attorney. Believe me this advise goes against my principles but if this is how you say it is, this guy needs some educating.