bartending

[ksjane]

What is the name of your state? KS

Are you requred to report all of your cash tips or a certain amount or any? I know its kind of a confusing question, but not sure how else to word it. A friend is a bartender and she said that she gets paid cash for hourly wage and tips and that her boss told her that she did not have to claim her tips and she is a little worried for tax purposes I guess. So I am wondering if that is true?

 

[Snipes5]

Her boss is full of it.

She has to claim ALL her tips. That's right, ALL of them.

If she doesn't, HER BOSS will be required to report a percentage of her pay and add it as tips. This is known as allocated tips. She will have to pay medicare tax and SS on these on her tax return.

I wouldn't work for someone who told me those things.

Go to the IRS website and look up allocated tips. It should be very enlightening for her.

Snipes

 

[ksjane]

Hello again, this is something my friend found under "allocated tips". Is this something different? Or does it not apply to her? I'm confused? But here's what she found:

"Topic 761 - Tips – Withholding and Reporting

Your employees who receive tips of $20 or more in a calendar month, while working for you, are required to report to you the total amount of tips they receive. They must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month are not required to report their tips to you.

Employees must report to you tips received directly from customers, tips from other employees, and tips customers charge to their bills. Service charges added to a bill and paid to your employees are not considered tips for tax reporting purposes.

Employees can use Form 4070A, Employee's Daily Record of Tips, to keep a daily record of their tips and Form 4070, Employee's Report of Tips to Employer, to report their tips to you. Both of these forms are in Publication 1244 (PDF), Employee's Daily Record of Tips and Report to Employer."

 

[anteater]

Hello again, this is something my friend found under "allocated tips". Is this something different?

Nope.

Or does it not apply to her?

Yep, it sure does.

I prefer the simplicty of the IRS Topic 402: "All tips you receive are considered income and are subject to federal income tax. You must include in gross income all tips you receive directly from customers, tips from charge customers that are paid to you by your employer, and your share of any tips you receive under a tip–splitting arrangement with fellow employees."

Scrounge around the IRS site some more and see how often the tip topic comes up. That's why the whole subject gets everybody bent out shape. And why, as Snipes5 so eloquently puts it, "Her boss is full of it."

Geez, I am so glad that I am not around any industry that involves tips anymore.

 

[ksjane]

Sorry--still confused...if that does apply to her then she doesn't have to claim her tips if she doesn't make more than $20--correct?????

"Your employees who receive tips of $20 or more in a calendar month, while working for you, are required to report to you the total amount of tips they receive. They must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month are not required to report their tips to you."

 

[Snipes5]

No, she DOES have to claim her tips if she makes less than $20, they are ALL subject to INCOME TAX.

However, tips of less than $20 in a calendar month are not subject to Social Security and Medicare Tax.

It isn't less than $20 per day, or per customer, it's PER MONTH, and that only affects the SS and Medicare.

ALL tips are subject to income tax, period.

I don't think we can explain it any more clearly.

Snipes

 

[ksjane]

Dont blow an artery I appreciate everyones help, that would be why I am here. Its just that the website you suggested gave info other than what you stated. That is why it was confusing to us NON irs folk. However, she works only one night a week and at a "not so upscale" bar, so she does not make that much in tips, she is only working there for the experience to get a better bartending position. Also, my cousin bartended for 6 years, cash under the table, never claimed any tips. As you say, they all have to be claimed, but he, nor the owner had any problems then. So thanks for everyones help, just trying to get this cleared up for friend. Thanks again.

 

[anteater]

Also, my cousin bartended for 6 years, cash under the table, never claimed any tips. As you say, they all have to be claimed, but he, nor the owner had any problems then.

Sometimes you get the bear. Sometimes the bear gets you. But, those times when the bear does get you, it is really nasty.

Cash floating around is to the IRS as blood in the water is to a great white shark.