Reporting Tips on Income Taxes

[EllenFrasier]

My son has a job at IHOP which he recently started. He is busing tables and sweeping up, setting tables, etc. At the end of the night, the manager gave him his share of the tips. Apparently the waitresses share a percentage of their tips with the bus boys. My husband told him he had to keep track of the tips so they can be reported on his income tax next year.
How does that work with tips? Does the IRS just take your word for it, or what?
We've never had anyone work in the food service where they get tips, so I have no experience with this. Thanks!

 

[Inigo]

My son has a job at IHOP which he recently started. He is busing tables and sweeping up, setting tables, etc. At the end of the night, the manager gave him his share of the tips. Apparently the waitresses share a percentage of their tips with the bus boys. My husband told him he had to keep track of the tips so they can be reported on his income tax next year.
How does that work with tips? Does the IRS just take your word for it, or what?
We've never had anyone work in the food service where they get tips, so I have no experience with this. Thanks!

He's supposed to keep track of his tips and claim all of them on his taxes next year. To do otherwise would be cheating on taxes.

 

[minnie1928]

Many, many, many years ago I worked at a chain restaurant where I sometimes bussed tables. The bussers were given a % of each servers sales as a tip. We keyed the tip amount into our time card system and that was reported to the IRS. From what I could tell, there was no "formal" tracking beyond whatever I keyed into the system.

 

[disneychrista]

Has he gotten a paycheck yet? If so don't be too surprised if the amount of tips is added, taxed and then removed from the check. It deffinetly sticker shock to most people. If this is the case then it will be included on his W-2 as income.

Another possiblity is that it will not be included as income on his checks, is that there will be allocated tips on his W-2. This is the amount the employeer estimated he got (for servers it is 8% of sales, not sure about for bussers/hosts.

In any case your son needs to keep track of what he actually recieves. Regardless of what has been done above, this is the amount that needs to be reported on his taxes at the end of the year. You can request a booklet from the IRS that has a place to track the tips and forms to give to the employeer for tax purposes.

 

[lulubelle6188]

I don't know about IHOP but were I work it's added to our check, taxed, then taken out. I have to write down everyday on a sheet how much I make. Then it's added weekly. It's included at the end of the year already. If they add it weekly he should just be able to tell them then and not have to keep up with it all year. This is just how we do it.
Tiffany

 

[EllenFrasier]

He told me today that his manager gives him the tip money and then enters it into the cash register, so I guess they are already keeping track of it and know how much he's getting. I'm thinking that it will be added to his income and show as taxed on his pay stub, but we'll have to wait until his first paycheck to find out. popcorn:

 

[disneychrista]

You better warn him that his check will be a lot less then he might think. It is a big shock to have to pay tax on income you already have.

 

[imthatgirl]

I work at a chain restaurant as a server. I can promise you that only 1% of people actualy claimall their tips. Yes the Gov takes your word for it...within reason of course. If I was claiming $10 a night they may take issue, lol.
For us we claim them daily, when we punch out the computer asks us what we made and we enter it...no need to remember. I have never worked anywhere that didn;t ahve this system. I would ahve him look into the proper way to claim.

 

[eeyorethegreat]

My son has a job at IHOP which he recently started. He is busing tables and sweeping up, setting tables, etc. At the end of the night, the manager gave him his share of the tips. Apparently the waitresses share a percentage of their tips with the bus boys. My husband told him he had to keep track of the tips so they can be reported on his income tax next year.
How does that work with tips? Does the IRS just take your word for it, or what?
We've never had anyone work in the food service where they get tips, so I have no experience with this. Thanks!

He's supposed to keep track of his tips and claim all of them on his taxes next year. To do otherwise would be cheating on taxes.

It doesn't sound to me that the OP was planning on encouraging DS to cheat on his taxes. Sounded to me like OP just wanted to know how it worked. Glad you god good answers OP

 

[Inigo]

It doesn't sound to me that the OP was planning on encouraging DS to cheat on his taxes. Sounded to me like OP just wanted to know how it worked. Glad you god good answers OP

I never said they were planning on cheating nor encouraging their son to cheat. I was just citing the requirement.

That said, there are a lot of servers I've met who do cheat on their taxes, and who brag about it.

 

[m&m's mom]

Has he gotten a paycheck yet? If so don't be too surprised if the amount of tips is added, taxed and then removed from the check. It deffinetly sticker shock to most people. If this is the case then it will be included on his W-2 as income.

Another possiblity is that it will not be included as income on his checks, is that there will be allocated tips on his W-2. This is the amount the employeer estimated he got (for servers it is 8% of sales, not sure about for bussers/hosts.

In any case your son needs to keep track of what he actually recieves. Regardless of what has been done above, this is the amount that needs to be reported on his taxes at the end of the year. You can request a booklet from the IRS that has a place to track the tips and forms to give to the employeer for tax purposes.

A busboy is an indirectly tipped employee therefore the "Tip Allocation" percentage of 8% does not apply.
When his employer records it in the system that is to take taxes out and to end up on a W2.

I work at a chain restaurant as a server. I can promise you that only 1% of people actualy claimall their tips. Yes the Gov takes your word for it...within reason of course. If I was claiming $10 a night they may take issue, lol.
For us we claim them daily, when we punch out the computer asks us what we made and we enter it...no need to remember. I have never worked anywhere that didn;t ahve this system. I would ahve him look into the proper way to claim.

There are several ways they can tell if you are not reporting correctly.
For one, if you have credit card receipts and they average say, 12%. Well, if you report cash tips of 8% - they can ding you the difference and penalize the employer.
There are other things on the form 8027 the employer has to report that can lead them to realize their directly tipped employees are not being honest.

 

[EllenFrasier]

I work at a chain restaurant as a server. I can promise you that only 1% of people actualy claimall their tips. Yes the Gov takes your word for it...within reason of course. If I was claiming $10 a night they may take issue, lol.
For us we claim them daily, when we punch out the computer asks us what we made and we enter it...no need to remember. I have never worked anywhere that didn;t ahve this system. I would ahve him look into the proper way to claim.

My son said his manager gave him the tip money and entered it into the cash register (computer), so I think that is what my son's boss is doing. So he will get something at the end of the year - like on his W2's - that will tell him his tips so he can report it in the correct spot on his taxes? That would be great! I want to teach him the correct way to do this as it's our first person in the family to get tips!

 

[apnep]

How does that work with tips? Does the IRS just take your word for it, or what?
We've never had anyone work in the food service where they get tips, so I have no experience with this. Thanks!

I waited tables through college and the general practice was to report 10%. At the end of every shift when we clocked out, the NCR machines we used would ask us what we made in tips and we would input our 10% so come tax time, it was already accounted for.

Ang

 

[PatsMom]

When he gets his first paycheck, take a good look at it. Bussing is not technically a tipped position. For my daughter's job, she is paid below minimum wage as a non-tipped busser (or expediter). She gets a portion of the servers tips. If those tips are not enough to bring her up to minimum wage, then she gets paid more in her base pay. The servers report the amount of tips they give her and it is recorded in the payroll system and withholdings are taken.

She has never had a pay period yet where her tips didn't get her above minimum wage but it could happen on a slow ski weekend.

 

[polineedyan]

Not turning this into a debate, so please just my two cents on other posts, not on the OP.
People who claim 10 percent are liars. Honestly, would you stay in such a lousy job if you AVERAGED 10 percent of your sales. If I sold 800 bucks one night, you better believe I make more than 80. More like 150. The going rate is 15 percent, and some go higher and some go lower. But to average 10 percent, honestly, means youre not very good.
Claim 100 percent of what you make. That way when you retire, youll get more. If social security still exists at that point...

 

[crisi]

Again, not regarding the OP....

Also, if you go through a full audit with the IRS as a waiter, expect them to very carefully review all your bank reciepts, credit card transactions and your standard of living in relationship to your income - and start looking for "under the table" cash transactions. Getting audited in a cash rich job can be very painful if the IRS suspects you aren't reporting all your income. They are well aware that not reporting cash transactions is a huge issue, and they don't really want to make it easy or pleasant - it isn't uncommon for them to "set an example" with those sorts of jobs, just so the rumor gets around that you want to report all your cash income.

The IRS frequently is an instrument of karma.

 

[disneychrista]

One thing that a lot of tipped employees do not understand is that if they do not report their tips/all their tips to their employeer, then that tip income does not count for things such as social security & unemployment or for income verification that creditors might do.

 

[chobie]

When I was a server 10 percent was all I walked out with after tipping out the bartender, busser, hostess. We had to tip out a percentage of our sales. Why should I have been taxed for all of the tip when it wasn't all mine?