TIPS & THE IRS

…in the end there is no income which doesn’t get 
taxed one way or the other..

 

Without tips, I feel the motivator is gone. I work for money. However, if there would be another form of incentives to create sales, like a percentage of the sales from my employer, I probably could do without tips.
TIPS & THE IRS
Working as a waiter I receive tips. Without tips, I feel the motivator is gone. I work for money. However, if there would be another form of incentives to create sales, like a percentage of the sales from my employer, I probably could do without tips.

Tips? Why does one have to tip a waiter? What would happen if all employers paid their wait staff a “competitive wage?” The first question is: Wages compared to what? What standards should one use for a waiter’s salary? Into which category does a waiter fit? Should they pay waiters the same as housewives? Or should waiters be better paid with a biweekly paycheck, maybe like like a bankteller? Or maybe waiters should have a monthly salary similar to a grocery store assistant manager? I don’t know! Yet I have experienced in several places, traveling Europe, wait persons who could not care less about what I ordered and if I ordered anything at all. I did not understand this attitude until I found out that the tip was included and the staff was on a salary.

I like my job. I know if the employer would pay me a mediocre wage and no tips, I would look fast for another income. For me those tips are not a guaranteed income, they are an incentive and have to be earned. Tips fluctuate greatly. Some days I work a whole shift and my pockets are empty, the reason: little or no business. On other nights I work a few hours but make a week’s wages in a relatively short time.

Any which way, my experience is that there is no income which doesn’t get taxed including my tips. Therefore I report them on form 4070 at the end of each pay period, in my case, at the time that’s twice a month. Reported tips, done on form 4070 at the time (1996) in the United States, should equal eight percent of the waiter’s sales or better, not less. This way one avoids the problem of allocated taxable income which is done by the employer to hold employees responsible for their taxes at the end of the calendar year. These allocations can add up to a big chunk of money owed to the government. The result can be a more or less friendly reminder from the IRS asking to pay up or else. Back-taxes are due and payable at the time of the income tax report. That is usually when the pockets are still empty from the slow winter business and the yearly overspending around Christmas. I know how it feels to pay taxes for the previous year. Therefor if I can avoid getting into debt with the IRS I try to, wherever possible, pay my taxes as I go instead of afterwards.

(IRS) Internal Revenue Service, the federal tax collection authority in the U.S.A)

by helmut schonwalder