New employees to the restaurant industry always ask me how much of my tips should I claim and do I have to claim them all. The answer is very easy. “You must claim them all.”
Now I know that many of you will not agree to that statement. Many of us have the misconception that we only need to report 8% of our total sales as tips. The law states that you and I must report all (100%) tips we receive, except for the tips from any month that we do not total at least $20.00. The 8% allocation is a requirement placed on the employer. For more on this go to http://www.irs.gov/pub/irs-pdf/p1872.pdf
Keep in mind that an IRS audit is no fun and you want to avoid the huge fees and penalties involved. Also you need to claim them in order to obtain Social Security and Medicare coverage. We can’t stay young forever.
Yes, I know we don’t get paid enough, the government taxes me enough already, I have rent to pay, C.D.s to buy and the list goes on and on. So really why should you or I want to claim all our tips?
Well let’s see. How many servers or any tipped employees do you know that cannot rent or purchase a home, have to walk, ride a bus or walk to work. Is it because they can’t afford the payments? Not in most cases. Most times it is because they don’t have any or enough credit. Without credit we are stuck, walking or living with friends or family.
One of the major things creditors look for is proof of income and the ability to repay. That’s right, if you can’t prove your income, chances are that you will be denied a credit card, the opportunity to get your own living accommodations or that new car you have been dreaming about.
Walking into a car dealership and bragging about how much money you make in tips at that nice new 5 star restaurant will only get you the cold shoulder and blisters on your heels having to walk home. But if you go into that dealership with your current paycheck stub or W4 showing all the mega bucks you earn (from the tips you reported) chances are you will be driving home in a nice shiny car.
Of course there is one drawback to reporting all your tips and owning that nice new car. Your fellow employees and friends will now expect you to be their taxi service.
Report all of your tips and I will be seeing you in the fast lane!
Put More Cash In Your Pocket!
