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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsIRS demanding share of server's tips.....I had no idea.....this is AWFULL.
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bunnies
(15,859 posts)Right from my first restaurant job. Tips have to be reported daily.
Egnever
(21,506 posts)that started sometime in the late 80's I believe
bunnies
(15,859 posts)My first restaurant job was either 89 or 90. 
notadmblnd
(23,720 posts)one used to be able to deduct car loan and credit card interest too.
Ms. Yertle
(466 posts)I waitressed for a very brief time in high school. So-1973. I remember the manager telling me that if I reported all my tips I was crazy, and if I ever quoted him on that, he'd deny it.
Erich Bloodaxe BSN
(14,733 posts)This isn't anything weird, or new. It's just like the IRS 'demanding' a share of any other person's income.
yeoman6987
(14,449 posts)They are so mean.
still_one
(92,138 posts)
The Velveteen Ocelot
(115,674 posts)What should happen is that servers should be paid so well they don't need tips, like many places in Europe.
clarice
(5,504 posts)The Velveteen Ocelot
(115,674 posts)If they don't report them they are guilty of tax evasion, and could face fines and penalties, although realistically a lot of times this doesn't get reported. You get income, you pay tax on it. If you don't pay tax on your income you're cheating the people who do. Sadly, the only folks who are given a free pass on this are the big corporations.
rusty fender
(3,428 posts)and let those at the top get away without paying enough. It is bullshit that tipped workers have to pay taxes on their measly tips. 
The Velveteen Ocelot
(115,674 posts)Tips have become an expected part of a server's income because they are paid so poorly. Therefore the IRS regards tips and income and requires them to be reported. Yes, I realize that a lot of cash income is not actually reported, and I agree that servers shouldn't be required to pay tax on something that was originally regarded as a gift. It's also worth considering that the IRS is more likely to audit lower-income people because they don't have the resources to fight them off. They'd get more money off the cheating rich, but they'd also have to expend a lot more effort.
former9thward
(31,981 posts)The IRS does not investigate servers and none of them report their actual earnings. They would laugh at your post.
The Velveteen Ocelot
(115,674 posts)because they don't have the resources to contest the results. Rich people might yield more money but they have lawyers. Also, future Social Security benefits are determined by one's total income, so unreported tips might hurt in the long run. I do believe tips shouldn't be regarded as income, but as gifts, but I don't decide those things.
former9thward
(31,981 posts)If for no other reason to keep people honest with our tax system. How it affects SS benefits I don't know the math on that one but I don't think most servers (or anybody really) looks ahead that much.
This is an article which gives the stats on IRS audits. Income less than $200,000 odds of audit 0.4%. Income of more than $1 million odds of audit 12.1%.
http://www.forbes.com/sites/anthonynitti/2013/03/25/what-are-your-odds-of-being-audited-by-the-irs/
I have been audited by the IRS two times. Both times they said I owed taxes and penalty. Both times after the audit they agreed they were wrong and gave me money because I had not taken deductions I could have.
Adrahil
(13,340 posts)I don't report all my internet purchases to my state either.
Besides, most servers make low enough income that they don't owe much, if anything, in taxes, even if they're reporting all their tip income.
I'll get upset over server tax evaders with the rich f*****s are paying their fair share.
ProdigalJunkMail
(12,017 posts)they get taxed on a percentage of their sales (TEFRA) and the jackwagons that tip five percent actually end up COSTING servers money. cash tips are easier to 'hide' but they're still on the hook for some...
sP
bottomofthehill
(8,329 posts)8%.
Of the ring divided among the bar and floor. Most of the time I got a check for 0 after taxes, SS meals and uniforms were withheld . Still not a bad job for a young person. It wears on you after twenty years though.
CreekDog
(46,192 posts)they are cheating themselves out of Social Security benefits if they do not.
clarice
(5,504 posts)CreekDog
(46,192 posts)Social Security isn't going anywhere unless a law is passed and signed to eliminate it.
clarice
(5,504 posts)Travis_0004
(5,417 posts)MohRokTah
(15,429 posts)Waitrons love getting cash tips. Being taxed on allocated tips when you pull down 15% or more in cash tips = 7% or more in untaxed income unless the honest waitron declares.
Kingofalldems
(38,451 posts)clarice
(5,504 posts)yeoman6987
(14,449 posts)We discussing appropriate tips reporting to IRS.
Kingofalldems
(38,451 posts)I think someone thought Obama started collecting taxes on tips and got schooled on it. What do you think?
'We'? That's funny.
MineralMan
(146,286 posts)The reporting stuff is sort of complicated, but all income is taxable. A lot people people working waitstaff jobs won't actually own any income tax, if their income is below a certain level, but tips are still income.
I'm self-employed. I have to report all income from my work. I can take business deductions, but I have to report all income. My clients file Form 1099 with the IRS telling the IRS how much they paid me, if that amount is over $600 per year. But, I'm required to report all income on my Schedule C.
Tips are income. It's simple.
fredamae
(4,458 posts)in the 1960's if memory serves?
Cerridwen
(13,257 posts)Last edited Mon May 18, 2015, 11:11 AM - Edit history (2)
See crabby's post #24 for corrections and sources: http://www.democraticunderground.com/10026676759#post24
I'll leave the old post for the other information I included about taxes and politics in the 80s.
"Tips," also called gratuities (and as such were treated as gifts for "going above and beyond" and were not previously taxed), had been exempt from being reported as income. repubs thought otherwise. I believe it was around the same time-ish, in which congress began defining dependents as "blood/marriage" relationships, credit card interest deductions were removed, and other rob the "poor/workers/middle class" for the benefit of the "ownership" class who will then "trickle down" their largesse unto the unwashed masses really started amping up and going in for the kill.
*maybe late 70s? I'll have to see if I can find anything on the internet from that time frame.
Well, here's an article from cnn:money, 2010, that covers part of what I'm saying though it's light on specifics:
<snip>
Soon after taking office in 1981, Reagan signed into law one of the largest tax cuts in the postwar period.
That legislation -- phased in over three years -- pushed through a 23% across-the-board cut of individual income tax rates. It also called for tax brackets, the standard deduction and personal exemptions to be adjusted for inflation starting in 1984. That would reduce "bracket creep" since the high inflation of the 1970s and early 1980s meant incomes rose very fast, pushing taxpayers into ever higher brackets even though the real value of their income hadn't changed.
<snip>
As a result of the 1981 and 1986 bills, the top income tax rate was slashed from 70% to 28%.
<snip>
The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.
<snip>
In 1983, for example, he signed off on Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees. (emphasis added)
There is quite a bit more at the article linked.
Link to an article http://www.nber.org/chapters/c5417.pdf from
The National Bureau of Economic Research
The politics of tax reform 1980s
Charles H. Stewart, III
1939
(1,683 posts)The House of Representatives was controlled by us from 1954-1994 and we were writing the tax laws during that timeframe.
Cerridwen
(13,257 posts)tortured. The problem for the Democrats was especially focused in 1981: reeling
in the wake of the 1980 election, when the Senate had unexpectedly gone
Republican, House Democrats could only wonder whether 1982 would be a
repeat of 1980 (or even of 1934, the last time the party controlling the
presidency gained seats in the House during an off-year election). Southern
Democrats were especially in a tight spot, since the 1980 election represented
the greatest strength of the Republican party in the South since Reconstruction.
Southern Democrats had lost 8 of their 77 seats in the House in the 1980 election, along
with 4 of their 16 Senate seats.
Of the Southern Democrats who remained in the House, Ronald Reagan was proficient
in winning votes in their districts: Reagan carried 58% of the southern districts
that sent a Democrat to the House in 1980 (Almanac of American Politics 1982). (emphasis added)
Page 13 of
The National Bureau of Economic Research
The politics of tax reform 1980s
Charles H. Stewart, III
Art_from_Ark
(27,247 posts)the House had enough "bool weevils" in it to side with Republicans, and the Republicans had a clear majority in the Senate.
Crabby Appleton
(5,231 posts)by a considerable margin. I was a tipped employee in 1966-67 and tips and gratuities were taxable then.
see i1040 tax booklet at:
http://www.irs.gov/pub/irs-prior/i1040--1966.pdf
note on page 4 where it lists taxable income, further elaboration on tips at top of page 5:
How to report your income
Wages, salaries, bonuses, commissions, fees, tips, and gratuities.
I worked as a tipped employee again 1972-74 also and was similarly taxed. Waitstaff were notorious for under reporting and I knew one woman that got hammered for $10,000 in back taxes in '72, she was depositing more money in the bank then she was reporting in earnings.
Heres the 1040 instructions for 1956 with the same specific verbiage "tips and gratuities"
http://www.irs.gov/pub/irs-prior/i1040--1956.pdf
Cerridwen
(13,257 posts)I'll update my post with the corrected information.
Much appreciated.
Ms. Yertle
(466 posts)I had to report my tips for tax purposes in 1973. In addition, if you think it started in the late '70's, there is no way you can blame it on Ray-gun, since he wasn't elected until November, 1980, and didn't take office til January 1981.
Cerridwen
(13,257 posts)clarice
(5,504 posts)I just didn't realize it. I still think it's a bloody shame. I guess I'll just have to make sure that my yard guy
declares the tips i give him. Wouldn't want to contribute to criminal activity.
SheilaT
(23,156 posts)I recall that there was a time when being a server was highly a highly desirable job because the tips were untaxed. My guess is that once a lot of checks started being paid by credit card and the tips became knowable, that was when the IRS decided they could start taxing them. I'm pretty sure it took a while before they decided to assume all customers tipped and therefore the tips, even the cash ones, were knowable.
I always tip in cash because I simply don't trust all restaurants to give the tips immediately to the server, even though they are supposed to. And they're not supposed to withhold whatever percentage goes to the credit card company.
clarice
(5,504 posts)
Gormy Cuss
(30,884 posts)the IRS with tools to mitigate under-reporting. Under-reporting of cash tips still happens.
jcboon
(296 posts)Honest people were supposed to report them. Most people just didn't. My first waitressing job was in 1972 and my father the lawyer said I had to keep track of them and report them. It was the right thing to do.
BlueJazz
(25,348 posts)
MrMickeysMom
(20,453 posts)Give the tip in cash so it's not reported. If I have to do this anywhere else (eatery, tavern) I'll do the same.
yeoman6987
(14,449 posts)Disability if needed.
MrMickeysMom
(20,453 posts)… of what health resources a worker uses to survive.
The crappy working conditions of those who work for tips (someone must have statistics on this) result in needing to expend more out of pocket money to cover what one cannot earn per pay. How many are getting any full time benefits? Many who work mostly for tips are trying to just MAKE it. Example- single moms and under-employed persons who do not even get employer-based health care. That tip money does more to lubricate the local economies of where one goes for their needs than what is set aside for SS.
It's insulting that wages are like this. The serious action is to pay a living wage and not be skimming off the crumbs.
yeoman6987
(14,449 posts)But I have friends who do really well with tips so much so that they didn't quit when they got other jobs because it was so lucrative.
Skittles
(153,150 posts)the real issue is people are not making enough money
MrMickeysMom
(20,453 posts)Livable wages. I also see how the immediate needs when people are this desperate put money in their pocket so that they will lubricate the local economy. I agree that it contributes less to SS old age, but labor conditions are pretty fucking out of control, and I know what people try to do to survive day to day.
Response to MrMickeysMom (Reply #27)
bhikkhu This message was self-deleted by its author.
Demonaut
(8,914 posts)TransitJohn
(6,932 posts)Maybe we need a 2nd Amendment solution!
JI7
(89,247 posts)i always try to tip in cash if i am able to. even if i use my card to pay for the meal i will try to leave the tip in cash.
former9thward
(31,981 posts)There are arguments it should be higher but they all have it. CA is not some exception.
JI7
(89,247 posts)Gormy Cuss
(30,884 posts)In those states, servers are covered by the Federal minimum wage of $2.13. Seven states (including CA) require that servers be paid the standard state minimum wage. The other states either have the same sub-minimum wage as the Feds or have set something above that but below the standard state minimum for non-tipped workers.
Bluenorthwest
(45,319 posts)addition to tips, most States have a lower hourly minimum for tipped employees.
myrna minx
(22,772 posts)Are paid $2.33 and hour. Let that sink in.
former9thward
(31,981 posts)if the tips do not come to that point. No one is going to work for $2.33 an hour.
myrna minx
(22,772 posts)Waiters and Waitresses
http://www.motherjones.com/politics/2014/05/minimum-wage-tip-map-waiters-waitresses-servers
The Minimum Wage Loophole That's Screwing Over Waiters and Waitresses
"Nobody felt comfortable asking employers about it."
—By Dana Liebelson | Mon May 12, 2014 6:00 AM EDT
As it stands, only seven states require employers to pay tipped workers the same minimum wage as nontipped workers. The federal minimum wage for the latter is $7.25, but the federal minimum wage for tipped workers has remained stagnate at $2.13 since 1991, with no adjustment for inflation. Employers are supposed to make up the difference if tipped workers aren't earning the regular minimum wage through their tips, but it doesn't always happen. The Economic Policy Institute, a left-leaning think tank, found in 2011 that tipped workers are more than twice as likely as other workers to fall under the federal poverty line.
The Minimum Wage Fairness Act, which Obama endorsed, would have gradually raised tipped workers' minimum wage to 70 percent of the regular minimum wage. But the bill has faced steep opposition from Republicans and the restaurant lobby. According to Open Secrets, the National Restaurant Association, which opposed the minimum-wage hike, spent more than $2.2 million on lobbying last year.
snip
In December, Washington's city council voted to raise the city's minimum wage from $8.50 to $11.50 an hour by 2016. But the bill didn't raise the minimum wage for tipped workers, like Hovland, on the basis that restaurants in Washington are supposed to make up the difference if tips don't meet the equivalent of $11.50 an hour. That's how the federal law works, as well. US companies are allowed to pay tipped employees pittance because customers are expected to tip well enough to surpass at least the federal minimum wage of $7.25, and, if they don't, companies have to chip in the rest.
But that's not how things always work in the real world. "The servers who make 'good money' are in the minority," says Maria Myotte, a spokesperson for Restaurant Opportunities Center United, which aims to improve conditions for workers in the industry. She notes that tipped workers are hit especially hard by "wage theft," whereby restaurants don't make up the difference when the tips aren't rolling in. Between 2010 and 2012, the Wage and Hour Division of the Department of Labor conducted nearly 9,000 investigations in the restaurant industry, and discovered that 83.8 percent had some kind of wage and hour violation.
davidpdx
(22,000 posts)I noticed a lot of businesses here in South Korea that do cash business or they will give a discount for paying in cash. That is because they are not reporting the income. It is actually pretty common from my experience of being here 11 years.
tblue37
(65,334 posts)just 55¢ per hour in wages as a waitress.
Zippyjuan
(41 posts)The IRS sometimes stinks but you choose your battles. I would rather have them overseeing this on a federal level than 50 state organizations that would be a nightmare. I hope I am never audited but that still is a powerful deterrent for rich cheats to pay their fair share. I would like to make more money, but I also don't want to be screwed if everybody cheats and I have to pay. I think the solution is just to get rid of cash transactions. Everybody pay with debit and credit cards. The tax cheats will not be skimming and letting poor bill pay the bills. You also know you're going to be paid when it's paid through a credit card. It's also instantaneous.
sendero
(28,552 posts)....tips are income. Income is taxed. Of course tips are taxed, as they should be.
That said, if your total annual income is really low, you will not be paying income tax so you will get it all back.
Algernon Moncrieff
(5,790 posts)..and maybe it's time to have a serious talk about tax cuts -- for the bottom 40%
orpupilofnature57
(15,472 posts)Laughed at, but this is no laughing matter.
Algernon Moncrieff
(5,790 posts)If you pay cash, the IRS requires that the server report an amount no less than 10% of the cost of the ticket, less applicable sales tax. In this instances, most servers can take 5-10% tax free.
