Bartender - Employer taking full paycheck change

[Bartender4867]

Ohio- hi all, I am a bartender in Ohio and received this message from my employee and it seems to be quite...off. I don’t know the legal standing here but I don’t want to have my paychecks being $0 because of their accounting mishaps. I bold and underlined the part I’m most concerned about.


“Hi Guys, As some of you have already noticed we have had to make some changes as to how we claim your tips for payroll purposes. Our accountant has insisted we make this change to protect both the company and you. Up until now we have always claimed 8% of your net sales. The difference between the 8% and what your credit card tips report has always been different, but we have been able to get away with it because years ago it was the industry standard. Since reopening in May, the credit card tips and tips in general have more than doubled across the board. And this is making the discrepancy glaringly obvious to us, to our accountant and we anticipate the IRS. For example, on a typical payroll we would be claiming about $3000 total tips across all your paychecks. Yet, the actual number right now is more like $14,000 and since they are credit card tips, there is a very obvious record trail of them......

For this reason, effective this payroll, we will start claiming all credit card tips on your paychecks. Because I know that you are still pooling tips, I am calculating a per hour tip rate. Total tips for all employees / # of hours worked = $hourly tip rate. Then the $hourly tip rate is multiplied by the number of hours worked. This ensures that who opened and who closed checks doesn't effect this number.

I know this is not great news for some, but there is an upside to it. Should we ever be shut down again, your paychecks will show a substantially higher pay, which will in turn bring you much more money on unemployment. Also, for anyone who wishes to purchase a house, or buy a car down the road, your income will show to be substantially more, which will benefit you in the long run....

Our fear is that with the way things are, come taxes next year, you will be held responsible for paying taxes on this money that was not previously taxed and we as the company would be fined for not withholding it. And it would put everyone in a very very bad position.

This will also zero out many of your checks which is unfortunately not great, but it is also the way that most places operate today. If you guys have any further questions regarding this, I will do my best to answer them, and if I cannot then I will reach out to someone that can.
Thank you for your understanding and don't hesitate to reach out to me.”

 

[LdiJ]

Ohio- hi all, I am a bartender in Ohio and received this message from my employee and it seems to be quite...off. I don’t know the legal standing here but I don’t want to have my paychecks being $0 because of their accounting mishaps. I bold and underlined the part I’m most concerned about.


“Hi Guys, As some of you have already noticed we have had to make some changes as to how we claim your tips for payroll purposes. Our accountant has insisted we make this change to protect both the company and you. Up until now we have always claimed 8% of your net sales. The difference between the 8% and what your credit card tips report has always been different, but we have been able to get away with it because years ago it was the industry standard. Since reopening in May, the credit card tips and tips in general have more than doubled across the board. And this is making the discrepancy glaringly obvious to us, to our accountant and we anticipate the IRS. For example, on a typical payroll we would be claiming about $3000 total tips across all your paychecks. Yet, the actual number right now is more like $14,000 and since they are credit card tips, there is a very obvious record trail of them......

For this reason, effective this payroll, we will start claiming all credit card tips on your paychecks. Because I know that you are still pooling tips, I am calculating a per hour tip rate. Total tips for all employees / # of hours worked = $hourly tip rate. Then the $hourly tip rate is multiplied by the number of hours worked. This ensures that who opened and who closed checks doesn't effect this number.

I know this is not great news for some, but there is an upside to it. Should we ever be shut down again, your paychecks will show a substantially higher pay, which will in turn bring you much more money on unemployment. Also, for anyone who wishes to purchase a house, or buy a car down the road, your income will show to be substantially more, which will benefit you in the long run....

Our fear is that with the way things are, come taxes next year, you will be held responsible for paying taxes on this money that was not previously taxed and we as the company would be fined for not withholding it. And it would put everyone in a very very bad position.

This will also zero out many of your checks which is unfortunately not great, but it is also the way that most places operate today. If you guys have any further questions regarding this, I will do my best to answer them, and if I cannot then I will reach out to someone that can.
Thank you for your understanding and don't hesitate to reach out to me.”

Before I get into it, I need to know whether or not your credit card tips are paid out at the end of the shift? You do not have to wait for them to show up in your paycheck correct? You get the cash that day right?

If the above is correct, then what you employer intends to do is what your employer is supposed to do...and yes, that sometimes results in an employee ending up with a zero paycheck. Technically, your employer should be including your cash tips in your paycheck as well, and if they don't, then you should be reporting them on your tax return as unreported tips.

 

[commentator]

I would based on what I am reading bet a significant sum that you should be looking for another job and soon, because I suspect your employer is anticipating closing down this business. Just a feeling I have, from reading all this. He's getting all on the right side of doing this so it will pass muster when he tries to sell it to someone else.

 

[LdiJ]

I would based on what I am reading bet a significant sum that you should be looking for another job and soon, because I suspect your employer is anticipating closing down this business. Just a feeling I have, from reading all this. He's getting all on the right side of doing this so it will pass muster when he tries to sell it to someone else.

That could be possible, but this is just the sort of thing that I hammer my own clients about, so it doesn't surprise me that the owner's accountant is hammering him about it at all.

 

[PayrollHRGuy]

Unless they are trying to tax you retroactively I don't see how the checks could ever be zeroed out and be legal.

 

[FlyingRon]

Unless they are trying to tax you retroactively I don't see how the checks could ever be zeroed out and be legal.

It could only happen if they are paying out tips in cash.

 

[LdiJ]

Unless they are trying to tax you retroactively I don't see how the checks could ever be zeroed out and be legal.

It happens all of the time in restaurants and bars. The bartenders and servers get 2.50 (or so) on the clock and the rest of their earnings are in tips. So, they work 40 hours a week for total pay of 100.00 and 5 days of tips at 100.00 a night cashed out. So, their total pay is 600.00 (paycheck plus tips). The SS and Medicare, Federal withholding and State and local taxes have to be withheld for $600.00 and has to be withheld from the $100.00 they get on the paycheck. Some times the only thing that can be withheld is SS and Medicare because there simply isn't enough paycheck pay available to cover federal and state withholding. Sometimes there is enough to cover federal also, and sometimes enough to cover state, but not always.