5 ms·
I can't articulate the details, down to the last detail, but the worst thing to happen to tipping is the change the IRS made, some years back. If I understand c
by mariodiana 5y ago
I can't articulate the details, down to the last detail, but the worst thing to happen to tipping is the change the IRS made, some years back. If I understand correctly, the IRS always used to estimate tip for a server based on a table's bill. (The custom is 15-20 percent, and I think the IRS used to average lower than that.) But the IRS always used to collect its cut on tips from the server.
The change is that the IRS now holds the restaurant owner accountable for the taxes due on the tip. The result is that instead of the money going to the server directly, it first has to pass through the hands of the business owner. I don't know if this still goes on, but some years back I recall hearing that some restaurant owners would then "distribute" those tips to other members of the staff — the busboys, kitchen help, etc.
Traditionally, waiters always "tipped out" the busboys and bartenders they worked with, on any given shift, and better service (theoretically) promoted more generosity from the waiter. But now that the business owner has his hand in it, the business owner will operate according to his own interests. The waiter is cut out. The waiter has less control, and less direct incentive. The waiter has less of a payoff.
Rumor has it (or, if you will, common sense has it) that some owners abuse their role as middleman.
- smachiz 5y agoThis isn't an IRS change. It was a public behavior change. The owners always had to withhold taxes from their wait staff, just as your taxes are withheld by your employer. The difference is that since almost all tips are now on credit cards, the business owner doesn't need to assume the % sales to withhold, and withholds based on virtually all of their employees tips. The end result is that the wait staff can't commit tax fraud by not reporting tips. The business owner didn't have to report cash tips, only withhold based on a % of sales. They still withhold on % of sales if actual tips are less than the % of sales.
- throwawayboise 5y agoThat is a change. I used to deliver pizza, it was cash or check, I pocketed any tips before I got back to the store, the management never had a clue how much tips I got or did not get. Even with the checks, they just went into a box and were totaled at the end of the day. No way to trace them back to an order.
- donatj 5y agoI don't know if there's been case law behind it, and I certainly wouldn't want to be the one to try it, but I feel like there's a strong argument to be made that tips are gifts from the consumer to the wait staff. That said, gifts totaling under $15,000 are non-taxable.
- notriddle 5y agoNope. Tips are their own, special thing described in tax law. https://www.irs.gov/taxtopics/tc761 https://www.irs.gov/taxtopics/tc761
- donatj 5y agoI’m not saying it’s not the IRS’s position, it certainly is, but there is a pretty clear argument to be made that the IRS is wrong. https://www.palisadeshudson.com/2013/09/if-gifts-are-not-income-why-tax-gratuities/ https://www.palisadeshudson.com/2013/09/if-gifts-are-not-inc...