Restaurant Withholding Tips; Is it legal?

[Goobergal99]

this is exactly why I started tipping in cash

 

[OrlandoMike]

Any person in a tipped position is required by law to report their tips to the IRS. In most restaurants, this is done either at the end of a shift, or at the end of the week. If you declare less than 10% of your sales, you can be sure the IRS will be knocking on your door!

 

[Goobergal99]

Any person in a tipped position is required by law to report their tips to the IRS. In most restaurants, this is done either at the end of a shift, or at the end of the week. If you declare less than 10% of your sales, you can be sure the IRS will be knocking on your door!

I worked for the IRS seasonally once...and I can gurantee you that a server is not being paid nearly enough money for the IRS to bother with an audit It isn't worth it

 

[OrlandoMike]

I worked for the IRS seasonally once...and I can gurantee you that a server is not being paid nearly enough money for the IRS to bother with an audit It isn't worth it

I can name at least 8 restaurants in the Orlando area that have been audited! Three at Disney alone!

 

[Nancyg56]

This would not fly with me! I tip my support staff according to the service the provide me! If a server assistant spends half the shift out on the loading dock smoking, they sure aint going to get the tip I give the the server assistant who is working their tail off for me!

But in most cases you really have nothing to do with this. It is customary to tip out the support staff, that is why discussion that servers get such a high wage is ludicrous. They tip out the bartender, the runner, and the bus person. 18% dwindles down quickly after that. My DS has his gratuities withheld, they were included in his paycheck after the percentage due his support. He felt that it was fair, these folks busted to make sure hat he could do his job. He paid taxes on his wages,no issues there and then his salary could be used as proof of income when he wanted a mortgage.

 

[Eeyores Butterfly]

FWIW: At the restaurant I worked at earlier this summer, we had to tip out the assistants and the bartender at a flat rate- a certain percentage of our sales. We could tip out more if they were extra helpful, but we had to at least do the minimum rate. We normally gave more that just because we wouldn't give them change. It really added up for them.

As for taxes, I was told by all three restaurants I worked at that we were required to declare a certain percentage of our sales in taxes. I was told that the law's minimum was 8%. Most restaurants in our area require 10%. Once I tipped out 2% to the bartender and server assistant, it is a very rare night that I make more than 2 or 3 dollars above what I declare. I live in a university town (the reason why I'm here) and most people will come to dinner but not budget to tip at least 10%. There have been nights that other servers have not made the 10% they were required to declare- before the required 2% tip out. Especially with the economy the way it is now. I'm glad that I got out of that restaurant. (FTR, I quit becuase of other reasons).

 

[Goobergal99]

I can name at least 8 restaurants in the Orlando area that have been audited! Three at Disney alone!

AHH... the business itself yes totally makes sense and you are right... but a waitress witholding tips, they wouldn't blink an eye

 

[OrlandoMike]

AHH... the business itself yes totally makes sense and you are right... but a waitress witholding tips, they wouldn't blink an eye

No.....I'm talking servers getting audited...it happens all the time!

http://www.restaurant.org/rusa/magArticle.cfm?ArticleID=719

4. Not reporting your tips is a big deal.
If the IRS audits you and finds out you didn’t report all your tips, you could be facing some big bills. Falsifying tip income is illegal. You’ll owe income and FICA (Social Security and Medicare) taxes on the unreported tips. You’ll probably be stuck with interest and penalties. What’s more, the IRS has the right to audit at least as far back as three years -- or further, if the agency believes it’s a case of fraud. Some restaurant servers have even been jailed for tax evasion.

 

[OrlandoMike]

I worked for the IRS seasonally once...and I can gurantee you that a server is not being paid nearly enough money for the IRS to bother with an audit It isn't worth it

And just curious, how much do you think a full time server at a place like Crystal Palace makes a year? I'm pretty sure you would be surprised, if not shocked!

 

[Goobergal99]

And just curious, how much do you think a full time server at a place like Crystal Palace makes a year? I'm pretty sure you would be surprised, if not shocked!

Educate me?? Cause I am very curious

I was sorta thinking more along the lines of like TGI Fridays... but I have been told that Disney servers are very well paid

 

[cmwade77]

First, in California no one can make less than Minimum wage, under any circumstances. Second if tips are given in cash and spent in cash without being deposited into a bank it would be near impossible for the IRS to audit it, this is the realistic view of it.

 

[mpls_mm]

First, in California no one can make less than Minimum wage, under any circumstances. Second if tips are given in cash and spent in cash without being deposited into a bank it would be near impossible for the IRS to audit it, this is the realistic view of it.

They base it on total sales, they can even base it on what other servers claim or what they have determined a similar restaurant in another area makes, an industry average can work. The only way to get around it is if you work for a place that under-reports sales to avoid taxes and other things, or you completely work off the books. I did once, it was the only place in my area and I doubt they had ever had a health inspection or paid liquor taxes or anything.

 

[cmwade77]

Well, perhaps you are a bad server and have bad tips, or you get the really bad customers that don't tip, my point is, the only way for it to be 100% accurate is for it to be included in the paycheck. I was in the Philippines for a week and a half and it was really nice not to have to worry about tips, tips are appreciated, but not customary there, generally, people leave the coins from their bill, nothing else and they are excited to even get that and they are lucky to make $50 U.S. per month, including tips. My point though is it is nice to know that you don't need to worry about tips, and I think if restaurants started paying a decent wage and said no tipping is allowed that people would really enjoy it and would eat there more often than another place down the road.

 

[mpls_mm]

I think if people stopped tipping and servers made the same the experience would be less exciting, I can't imagine all of my favorite dining place servers replaced with the average fast food employee. That's exactly what you would get. I would eat out less.

 

[OrlandoMike]

I think if people stopped tipping and servers made the same the experience would be less exciting, I can't imagine all of my favorite dining place servers replaced with the average fast food employee. That's exactly what you would get. I would eat out less.

You have to understand, the thrill of not knowing how little or how much you are going to make each evening is part of the excitment of being in a tipped position. It makes you work harder. If you paid tipped employees a flat rate you would get flat service!

 

[cmwade77]

On the contrary, if you pay well, you would get better employees, plain and simple, look at In-n-Out, this starting wage is about $10 per hour excellent for fast food and they get great employee who go out of the way, same goes for Panera and Corner Street Bakery. In the Philippines, it actually brings the level of service experienced at fast food up as well. For example, at McDonald's, they bring you your food, they clear the table for you (even if you are starting to do so), even if you are already starting too, they check with you to make sure everything is alright with your order, so based on what I have seen, I would say that it would improve the level of service everywhere, especially at fast food. Again, you get what you pay for and the sit down restaurants would have to pay a good wage (basically equal to what they get now including tips) but would also get paid based on a short guest survey, that guests could fill out online at home for a chance to win something, of course not getting surveys would nt affect the pay, only good and bad surveys would.

 

[barkley]

First, in California no one can make less than Minimum wage, under any circumstances. Second if tips are given in cash and spent in cash without being deposited into a bank it would be near impossible for the IRS to audit it, this is the realistic view of it.

the irs has been known to use the identical method we used at social services to audit these issues. a person can be required to provide an accounting of their living situation such that they must provide rental agreements or mortgage papers showing the manner in which those items were paid (and a release is signed to verify with the landlord or lender the manner of payment), utility records and receipts, auto and other loans/credit lines, insurance (auto/home/renters/life). that information is compiled along with reasonable figures for transportation and misc. (food, personal needs, any previously reported medical expenses) into a budget sheet and compared to reported income. if the outgoing money is greater than the reported incoming then it must be explained and verified how that is accomplished.

i had plenty of former public assistance clients who had irs leins sitting on their credit reports from underreported tips (another commonality many shared were charges for falsifying student aide applications by underreporting tip income-the student aide and grants they received were deemed fraudulent and made payable)-this was in addition to the overpayments they owed social services, and the criminal charges all 3 agencies sometimes opted to pursue (highly publicized because it sent a message to similar employees in a given region).

we loved it when someone who was'nt reporting accurate tips ticked off a co-worker. the greatest single source of fraud information was disgruntled co-workers or someone who was reporting and overheard someone bragging about what they were'nt.

 

[OrlandoMike]

On the contrary, if you pay well, you would get better employees, plain and simple, look at In-n-Out, this starting wage is about $10 per hour excellent for fast food and they get great employee who go out of the way

$10 an hour is pretty low pay for a server. If your good at what you do, work at a decent place, know your job and work hard, that would be a pretty severe pay cut! If you wanted the restaurant to pay servers what they currently make, you had better be prepared to pay about four times as much for that steak dinner as you are now!

 

[cmwade77]

You have to understand, the thrill of not knowing how little or how much you are going to make each evening is part of the excitment of being in a tipped position. It makes you work harder. If you paid tipped employees a flat rate you would get flat service!

Again, not based on what I have experienced, if you pay well, you will get good employees, of course, my system wouldn't be flat, it would be a more accurate representation of how well the people were doing their jobs based on the surveys mentioned in my previous posts.

 

[cmwade77]

$10 an hour is pretty low pay for a server. If your good at what you do, work at a decent place, know your job and work hard, that would be a pretty severe pay cut! If you wanted the restaurant to pay servers what they currently make, you had better be prepared to pay about four times as much for that steak dinner as you are now!

That is for fast food, my point, is for fast food that is a good wage, they get good people, if you pay a good wage, say $30 an hour for a server, you are going to get good people.

I also don't understand that argument, I can see paying about 15% (or the average tip in your area, I am basing it off of what is done here) more (as some people will make less and some more than a 15% tip, but should average out to the 15% average), I can not see 4 times as much, doesn't hold water, sorry.