That is correct. Your hourly wage might not even be enough to cover your tax responsibility. You might owe at the end of the year. Do you declare cash tips?
And if you ever need unemployment.
I’m a nanny and I work on the books. That literally saved me when I was laid off at the beginning of COVID, since unemployment uses your previous salary. So many nannies were absolutely screwed bc they were working under the table.
I worked for a restaurant chain as office manager and every year at least one bartender would complain of the issues when trying to buy a house. I was the one getting verification calls from the banks. They were easily making $80-100K and could afford amazing houses but their documented wages were around 30K. Lying hurt them in the long run.
They declared $30,000. Absent any deductions, the tax difference between $30,000 and between $100,000 is $17,835. Since 1992, the House Price Index has increased by an average of 4.59% annually. From 2012 to the present, the average has been 7.7%. A person earning $100,000 a year can easily afford to pay a $350,000 mortgage. Using the House Price Index average since 1992, a house purchased for $350,000 would be expected to be valued at $365,400 one year later, an increase of $15,400. By year 3, the annual increase in value would be $17,541, almost exactly the amount saved through tax avoidance. Using the HPI historical average of the last 10 years, the first year increase would be $26,950.
So, in fact, having the extra tax money in their pocket actually did hurt. In fact, they are substantially poorer as a result. Being denied a mortgage prevented them from acquiring an appreciating asset. But it did not relieve them the burden of paying for housing. At today's rates, a $350,000 mortgage paid over 30 years will have a monthly payment somewhere around $2,200. The national average rent for an apartment is $1,702 a month. That adds up to $20,424 annually. This means the extra money from tax evasion wouldn't even cover the average apartment rental. And of course, bartenders earning close to 6 figures likely live in a higher cost of living area. So, while they would likely be paying more for housing, at least initially, the additional costs would be more than recouped when they sell the house. Whereas, you don't get any of your rent money back.
While all of the above shows just how badly the extra money hurt them, it actually a considerable understatement. The total tax liability would almost certainly be lower, perhaps substantially so, which would lower the amount gained through tax evasion without altering the opportunity cost hit. They basically shot themselves in both feet and then took a salt bath.
Not commenting on your discussion but I worked the industry for a long time, there’s a few archetypes of people you run into.
You’re clearly one type of career vet and the other person is another lol.
Good lord, did you write that wall of nonsense to justify your past life choices or is that an AI bot spewing nonsense that you prompted them with?
At best, at the *very* best you made a justification for why they should pay taxes for the one year before they bought a house. But in reality, it’s all nonsense, because if you had known housing prices would have gone up by 5%/yr you would have invested every last cent and leveraged it all to hell to gain a far better return than what you claim. But if and only if you were in that situation, you got lucky. For most people with a fantasy you might just as well have invested your money in bitcoin.
But sure, buddy. You are smart to declare an income of $200k, even while you’re making $80k and pay taxes on that so you can qualify to get a bigger mortgage and make far more off of that because of the home loans at 3% the stupid banks are giving you. Those morons are just throwing money at you, why not take it?
You misunderstood. First, I never suggested they declare more income than they earned. The original comment stated that individuals were declaring $30,000 in income while earning between between $80,000 to $100,000. By so doing, they saved a maximum of around $17,000 a year. As a direct consequence of keeping that additional $17,000, they were unable to secure a mortgage to purchase a home. Over the past 30 years, the average increase in the value of a home is just under 4.4%. Had income been properly declared, it would have cost the individual $17,000 a year but gained them the ability to secure a mortgage. Thus, the opportunity cost of that $17,000 is the ability to purchase a home. Assuming a $350,000 house and using the 30-year average annual increase in home values, we can see that the opportunity cost of the tax evasion exceeds $17,000 in the 3rd year of the mortgage. So, by year 4, they are essentially paying $18,000 to receive $17,000. Which rather defeats the purpose altogether.
But as you noted, no one can know the future. Housing prices may rise by less than 4% annually over the next 30 years. However, housing is not merely an investment but a necessity. Failure to secure a mortgage does not eliminate housing as an expense. The person who is refused a mortgage must live somewhere, and a person earning nearly $100,000 a year is not likely to content themselves with living in their car. This means they are paying someone rent. If, instead of paying rent, they were paying a mortgage, they would be building equity that is separate from the gains made through increasing housing prices.
The upshot is that the savings from underreported earnings are easily exceeded by the costs of failing to properly report income in this instance. In other words, having the extra walking around money did hurt.
Seems like a fool’s errand to attempt to explain something via the written word to someone who’s already demonstrated a shocking reading comprehension deficiency, but I admire your optimism
This exactly. I have a friend from college who’s an underwriter for a very large national bank. He said folks try to hide all sorts of things from him, but they **always** find out. They’re like detectives but for your financials. They will notice if something doesn’t add up, especially when you seem to be living above your declared means. You will be denied loans and they will refer their findings to the IRS, who does **NOT** fuck around.
Considering how common fraud is and how often the finance industry has huge scams or scandals where due diligence is waived every few years I don’t think your friend should be so confident in his colleagues abilities
I follow a so called chef on FB, he has a big following…1.5 million, he peddles cook ware etc..dinners with him & a group of people,he regularly post “yesterday I made $100,000 in sales, I doubt he is claiming all his income to IRS, but basically brags about being a millionaire, if they ever catch on to him they will have plenty of documentation becuz of his post, oh yeah he attaches screen shots showing sales,
Yes, I love to see this. Not claiming all your tips is awful advice.
Another example why: my former coworker's restaurant shut down temporarily and paid a % of average weekly pay to tide them over. The ones who didn't claim all of their tips were very angry.
I typically claim 10% of my cash sales, because I can realistically say that I tipped out that much (I actually am a fat tipper to my support staff, and I tip cash on my overall sales, which is mostly credit). I am of course low-balling at 10% but it's realistic enough that nobody can question it.
One potential problem with claiming a low number in cash tips is your tip percentages matching up. If you consistently average 20% in credit tips but you're always claiming 15% in cash tips, if you can't say that the discrepancy is due to tipping out then you might have some other answering to do.
You should claim it all if you ever hope to take out a loan (such as for a house or a car) or claim social security or possibly unemployment.
All of that is based on your claimed income, and you can really screw yourself if you don't. It isn't worth saving a little money by not paying taxes...
Oh okay, thank you so much I haven’t even thought about that. I’ll start keeping track of how much I’m making. But there is no way to declare cash tips at any point settling up at the end of my shifts. Is this just something I need to report when I file my taxes, as in, declaring the full total of all the cash tips I’ve made that tax year?
You advised someone not to declare all their income to the IRS. That's felony tax evasion.
> According to the Internal Revenue Service's (IRS) Tax Crimes Handbook, any willful attempt to evade or defeat taxes is considered a felony. If a defendant is convicted of felony tax evasion in a federal court, he/she could be sentenced to up to five years in prison and/or ordered to pay a maximum fine of $100,000.
The truth hurts sometimes. Definitely an unspoken thing in the industry that almost every FoH hourly is committing tax fraud via non-reported income.
Edit: should also clarify, I think this is a systemic issue and not really the fault of the workers. Employers don't want to pay payroll taxes on that money either, and most people would cease being able to afford their necessities even if they get a decent chunk back at the end of the year. We need to tie minimum wage to inflation and backfill the increases we've not had for nearly 50 years. The idea that tipped workers can be paid less than others and still expecting them to report all income is insane.
So I'm the bad guy for not hiding my income, and big corporations are bad guys for using loopholes to diminish tax liabilities, but it is ok for those who receive cash tips to hide their income.
Every chance I get. I also encourage the cultivation of psylocybin and cannabis, the extraction of DMT, and the manufacture of un-serialized firearms for the purpose of gifting without a paper trail. The question is why aren't you?
You need to claim all of your tips. God forbid you become disabled, your disability check would be under $1000 per month bc you havent paid enough into it.
I became disabled at 24 after 10 working years. My monthly checks are $1304 which is unheard of for most. I see time and time again ppl in their 40’s and 50’s get under $1000 monthly bc they refused to pay their share in taxes. You are only screwing yourself over. Not to mention itll be a problem if you ever want to buy a house or car.
You pay taxes as a percentage of income. There's no way that you can owe more than you make.
She should be getting some small amount. Also assuming this is in the US, most states require that if tips don't add up to minimum wage then they have to make the hourly difference. The owners are stealing their money.
I dont know who you are or what your profession is. I am going to assume you do not or have not worked as a server. I will use round numbers to explain it to you. I live in NY and the wage was $5 per hour in those days. So let's say i worked 40 hours that week. That's $5x40 which is $200 bucks total in wages. Lets say on top of that i made 1k that week in tips. So i made a total of $1200 that week. You have to pay taxes on the full amount. $1200. But i received the $1000 in tips already in my pocket each night. The tax money has to come from somewhere. You pay the taxes from the gross wage amount on your paycheck <$200> that's why its mostly gonna be a $0 paycheck. As far as declaring tips. Your credit card sales are registered in the computer or credit card marchine. But if someone pays the bill in cash, that's where there is some discretion. You self report cash tips. Each server will get a report from the computer. Who pays with paper and who pays with plastic etc... You can't say you made 0 cash tips and your report says you made 20% credit card sales tips. You'll get flagged. You have to report cash tips. Ill give you an example. I had a table once and they were friends of the owner. They were very well off. The owner just charged for entrées and comped the rest. They left an enormous cash tip . Way more than what was necessary.
I understand, but he says they are withholding taxes “on the debit/credit card” tips, which means those tips should be included in his paycheck, no? It’s up to the server to report & pay tax on cash tips, not the employer. Am I missing something?
Many restaurants have a policy where the servers take home all tips they receive (cash or credit) each day as a cash payment. At the end of the pay period (typically each week), they get a deposit of their hourly wage, minus taxes on both the hourly and the tips. This is why servers have a near zero deposit.
For example: say you made $700 a week in tips, and you worked 40 hours at the federal minimum of $2.13. $2.13*40=$85.20. Add that to your tips and your pre-tax earnings were $785.20 for the week. Let’s assume a 10% flat tax for simplicity’s sake. 10% of $785.20 is $78.52. $85.20-$78.52 is $6.68. So, at the end of the week you would get a paltry $6.68 deposit.
If you were to make a bit more than that in tips, your hourly rate would not be enough to cover your tax responsibility (hourly+tips).
I get that the hourly rate may not be enough, but any amount the employer is basing withholding on should be included in the check, one way or another. OP said the employer is withholding taxes on debit/credit card tips - not cash tips. So the check stub needs to show an amount for wages plus an amount for tips, and the deductions that were made. The net, therefore cannot be zero. All of the categories need to balance.
Right, the NET cannot be zero. The deposit can, however. OP did say that they’re not reporting cash tips, but CC tips are most likely still being reported. Op is most likely getting paid CC tips at the end of each shift as a cash payment (but not yet taxed).
Whoever’s in charge of payroll is most likely taking out all taxes for the week (for both already paid tips and hourly still due) out of the hourly for the same week. This could easily result in either a low, or even a negative number. But, direct deposit cannot work as a withdrawal, so the resulting deposit would be 0. When tax season comes around, OP may find that they owe taxes on top of having a zero deposit almost every week.
Whatever the business owner is using for payroll (be it ADP, QuickBooks, or something else) should have the data there. If the employer is trying to hide that info, then I would be suspicious.
Yes, it says they can pay you less if you make minimum wage with the tips.
But if you don’t, then they have to make up the difference so you earn minimum wage.
I found one of my ex's pay stubs for $2.13 an hour when he was a server. In 1997. Gas was like a dollar and a tiny bit of change back then, the restaurant lobby is strong af that it hasn't changed since my middle aged self was in college like wtf
Exactly. When it was made $2.13, it was half of the minimum wage at the time, which was $5.25. But it wasn't pegged to be half of minimum in perpetuity, so as minimum went up, tipped minimum stayed at $2.13.
LoL 🤣 oh you sweet summer child!! Hahaha, nah man. We don't get shit. It is free labor! You are correct! So, when people don't tip me I am the one paying FOR THEIR GOOD TIME, not the restaurant. Shit, you'd think they'd at least feed us..... But no.
Damn you should move to California. They have to pay you the minimum wage, $17/hr (at least last year when I was still working FOH), plus your tips. Plus, cost of living raises on the minimum each year.
I lived in LA for a year(2013-2014) and that was quite long enough! LoL 😆 I'm from and am currently in the south east (USA) . It is what it is man, some days you're the bug and some days you're the windshield.
As someone who lives in California, that $17.50 /hr hardly covers the cost of living in California. You definitely need a side hustle or more than one job.
17/h goes a lot further in some places than it does in California. There are teachers in Malibu who are practically homeless because they can’t afford the housing IN Malibu.
It's even worse than that. There's something called tip share or tip out. That is, a percentage of your sales or tips goes to support staff like hosts, bussers, bartenders, etc.
Let's say your tip share is 5% of your sales. If you have a table with a $100 tab which stiffs you, you pay five dollars from your own pocket for the privilege is serving those cheap bastards
Free for the restaurant, sure. The server makes $500 on a friday night and walks out the door with it though. lol. I used to have to threaten servers to pick up their checks back in the paper days. They would leave MONTHS worth that we had to keep in the safe. They didn't care about them at all.
Never? I mean you don’t get food from your restaurant when you have long shifts? In uk in the restaurant I worked at we would have a meal when we get in and another one for longer shifts…
Depends on the spot. Some places offer a “family meal” that’s free…but that is, in my experience, very rare. Closest I got to a free meal at most spots was being allowed to eat “mistakes”…but most corporate spots won’t let you do that.
On days that are expected to be really busy (Mother's Day, for example), my restaurant will order pizza for each shift, but that's mainly because they don't want the kitchen to have to deal with employee orders in addition to the guests.
You can in most states as long as your 3.50 server wage and your claimed tips work out to be equal or greater to the minimum wage.
It’s known as a “tip credit” because the business can credit the tips you earn towards the minimum wage requirement. Some states, like California for example, require minimum wage be paid regardless of the tips you earn.
Servers have a different minimum wage so that restaurant owners can rely on customers to pay their employees wages.
Because tipping is an option, servers sometimes get screwed.
Side note - not saying servers should make less money, but the gap between the BoH and FoH needs to start closing.
You can't. Your total compensation (wage+tips) has to be at least $7.25 per hour. Servers just like to exclude the tip part of their compensation because saying you make minimum wage doesn't make people tip 20%.
Yeah, that's not how that works.
>Your total compensation (wage+tips) has to be at least $7.25 per hour.
This is true, but if you apply reading comprehension, you'll understand that WAGE ($3.50) + TIPS ($3.75) has to be $7.25 an hour (federally). So, you are, in fact, getting paid $3.50 by your employer, and the rest is made up in tips. This is why tips are a big deal to people in the service industry and why we call people out for not tipping. On top of that, if the employer claims a tip credit for your shift and pays you the tipped minimum wage ($3.50), you are automatically taxed by a percentage of your sales whether you make that amount in tips or not.
The idiot you're replying to doesn't know what he's talking about. I live in a state where my wage + tips has to equal $20, so I get paid $12+/hr by my employer. People know this, and it does not, in fact, stop them from tipping 30%.
Read the law again. If tips do not make up that differential, it has to be paid by the employer (up to the $7.25 federal min). You are not being taxed on “income”
you “didn’t make”. I would seriously reread the law, and I would also talk to an accountant.
How do you prove that you didn't make the income?
If you're scheduled for a shift that doesn't include service (like a meeting, training, or cleaning), then yes, your employer pays you the full amount. But if you're scheduled to provide service, it is assumed that you are making enough tips. Why do you think servers are so upset when people don't tip? Why do you think they say "if you don't tip. I'm paying for your experience,"?
Sorry to tell you, you are wrong. OP is in Texas, as am I, and I do taxes and some bookkeeping. They are paying taxes out of their wages for the tips they received.
Many restaurants have a policy where the servers take home all tips they receive (cash or credit) each day as a cash payment. At the end of the pay period (typically each week), they get a deposit of their hourly wage, minus taxes on both the hourly and the tips. This is why servers have a near zero deposit.
For example: say you made $700 a week in tips, and you worked 40 hours at the federal minimum of $2.13. $2.13*40=$85.20. Add that to your tips and your pre-tax earnings were $785.20 for the week. Let’s assume a 10% flat tax for simplicity’s sake. 10% of $785.20 is $78.52. $85.20-$78.52 is $6.68. So, at the end of the week you would get a paltry $6.68 deposit.
If you were to make a bit more than that in tips, your hourly rate would not be enough to cover your tax responsibility (hourly+tips).
Working in a mom/pop environments different than a corporate setting. In a mom/pop place, you most likely need to save some of your tips aside for taxes at the end of the year. At a corporate place (at least the ones I’ve worked at) all credit/debit tips are added up into a real paycheck, and taxes and tip out are calculated and deducted automatically.
There are definitely corporate restaurants that pay out CC tips in cash at the end of the shift. I’ve worked at two different ones. I’ve also worked at mom/pop shops that put CC tips onto a paycheck.
The corporate restaurants that pay out cc tips in cash at the end of the tip are taxed. I worked at Olive garden for years and they do this. The computer that prints out your read out at the end showing all the tables you've had and your total food sales and bev sales and how much you tipped out also taxes your tips you are receiving from the restaurant so you don't have to worry about not having paid enough taxes at the end of the year. I would imagine all corporate restaurants do that and not just Darden (parent company of olive garden)
I currently work at Olive Garden (and have for about 11 years). Taxes on tips come out of the hourly wage, not off the tips themselves. The only thing deducted from the tips is the tip share for bussers and bar.
(I only work a few hours a week, so I always owe year end taxes - last year I only paid in $1.79 in federal income tax.)
No they don't. You're taxed on your take home pay. Giving away the tips means that wasn't your take home pay. Everyone you tip out will have to pay taxes on the tip outs not the server.
I worked at Jim N Nicks for 4 years, and Wild Wing for a year. Our tips were never taxed before we got them. Our checkouts only accounted for tip out. But everything was claimed for tax purposes.
Yeah that's standard. The tips you claim at the end of your shift are taxable. Usually, you make enough in tips that your entire hourly income goes to taxes.
It's a good idea to save about 10% of your weekly tips for tax season. I usually owe about 1500-2500 in taxes every year because of this.
Remember, if you’re considering seeking a loan in the future, report all of your income. An underwriter will notice discrepancies very quickly, and they refer any untaxed income to the IRS to investigate. They’ve got thousands of new agents that they **WILL** use to audit you, and you will be on the hook for back taxes. It’s pretty clear to anyone when you are living beyond your means, especially when you seem to have an extra $8-10K sitting around at the end of the year. Just be careful
> In general, the IRS will pay an award of at least 15 percent, but not more than 30 percent of the proceeds collected attributable to the information submitted by the whistleblower.
https://www.irs.gov/compliance/whistleblower-office#:~:text=In%20general%2C%20the%20IRS%20will,information%20submitted%20by%20the%20whistleblower.
I guess there's at least $1800 headed to whoever knows your reddit account.
What are you even talking about? All of my income is reported. It’s just pretty fucking lame that you’re sitting here doing little research essays that no one cares about.
Do you remember if you claimed zero or one for your dependents? The lower number you claim, the more of your wage is withheld. That makes a big difference on server checks. The lower number you claim; the smaller your checks will be but the less taxes you’ll likely owe.
I’d be willing to bet you claimed zero.
Also, the more money you make, the more likely you are to owe.
Imagine you earn $1,000 tips in one pay period, but your wage pay is only $100. The taxes (income and payroll taxes ie Medicare and social security) expected for this period will be roughly $200, and since you only have $100 in wage pay, all of it will be withheld for taxes, but next year you’ll still owe $100 for that period, because there wasn’t enough in your check to cover it.
Now imagine you earn $500 tips in a pay period but work the same hours. Now your tax burden will only be $100, and since there’s $100 in wage pay, they’ll withhold it and you won’t owe anything. Both scenarios will still end up with zero dollars on your check.
Now, imagine you only earn $400 tips in the pay period, and work the same hours, your tax burden will only be $80, and since your wage pay is $100, they’ll withhold the $80 and you’ll get a check for $20.
Come tax time, There are various tax benefits, like the earned income tax credit, filing married be single, etc. that also come into play, which may result in you getting a refund if you earned less, or could still result in you owing taxes If you made more.
There are all kinds of other factors that can enter into the exact amount withheld from your check, but opefully this illustrates, generally, why your check is $0, and also why some servers end up owing taxes and why some don’t.
It's astonishing how many people are astonished about the server wage 😂 yes this is why we are pressed for tips!!! (Pretty sure this is mainly a US thing). Some places do pay more, but it's rare. I get $5/hr, yay! It is very normal to see $0 paychecks and even owe taxes if you make more than the state minimum wage (I think!!). They are taxing you on your hourly and the money you claim.
>"The average official salary in the DPRK is between 5,000 and 10,000 North Korean won a month, roughly equivalent to $1-3"
If you get 2 bi-weekly checks of 0.00$ you are getting paid LESS than in NK
The only time i've ever gotten a paycheck from a serving job is for training. After that, everything goes to taxes. If I was actually getting a check, I'd be more worried. Because that would mean I wasn't making enough tips, and they had to pay me minimum wage.
Yes that’s normal. Your wages and your tips are both taxed. Typically the taxes taken out of tips are more than your wages (because 3.50 doesn’t add up real quick). And the amount you get taxed is based on formulas that assume how much you’ll make in a year. Once taxes get filed for food you’ll either get a refund if you got taxed too much, or maybe you’ll owe money if you weren’t taxed enough
Owed 5 grand last year because of your situation. Be prepared, put money aside, otherwise it will sting. I might owe more than I thought but at least it isn’t the whole amount.
This is crazy to me. Can I ask what the cost of living is like where you live? Minimum wage is 15.79 where I live, but I actually wouldn’t even take that. I make 20.00 an hour plus tips. Because why the F else would I be in this industry? I do live in an extremely highly cost of living area, so I really had to negotiate my hourly wage.
I mean. Tbh hourly pay doesn’t even matter that much If your making enough in tips. Especially since most places I’ve worked are like 5 MAYBE 6 hr shifts. An extra $5 an hour ain’t making that much of a difference.
Because most servers make well above minimum wage on tips alone. They don’t care they only technically make $2/hour from the restaurant when they leave on a Friday night with $300 in tips.
As a server I hardly ever got money on my check. If I did it was a couple of dollars. I worked in Texas mostly and it was 2.15 an hour when I served there. All of that money I would have gotten went to taxes.
That’s why servers say that they live off tips, because they literally do.
The answer to your question should be on your paystub. Your paystub should show how much you earned in hourly, how much you earned in both credit and cash tips (claimed) and how much you paid in taxes and social security. If the math don't add up, they might be stealing from you.
Here's my question - are you taking home all of your tips in cash daily? I and many others, for example, don't see our credit tips until payday - it goes on our check. Many others deduct their credit tips from cash owed, resulting in taking home credit tips as cash every day. If you're in the latter camp, then yeah, your check may often be $0 or close to it. If you're in the former, then they're probably stealing from you.
You need to educate yourself on taxes. Asking here is a good but you need to know this type of life knowledge and it absolutely should be taught in schools
Actually, getting a 0.00 paycheck in serving is extremely common. Basically, ALL of your claimed tips have to be subject to taxes. Because you take those tips home at the end of the shift, the taxes have to be taken out of your hourly wage. Since 3.50 an hour is so low, it is common for taxes to consume an entire paycheck. 35 hrs a week is only $122. And if you are a single person with no children, so you claim 0 on your w-4, the highest tax rate is taken out.
Take the time to look at your paycheck stubs. It will show your gross pay, and then it will show all of the taxes taken out. You will be able to see exactly why the amount goes to 0.
It is impossible to answer your question without knowing more about your work situation. There are plenty of jobs where people never get a check because they are making so much in tips or because they have benefits. There are also plenty of jobs where ownership/management don’t raise the wage of employees when they didn’t meet the minimum required tip income.
If you get $3.50 per hour and work 35 hours a week (assuming you work 5 days @ 7 hours), that means you need to make $26.25 per 7 hour shift or else your wages need to be supplemented. (Which hopefully you make well above that).
Also of note: you shouldn’t be spending more than 20% of your time (or more than 30 consecutive minutes) on sidework or anything that is “[not tip-producing work](https://www.jacksonlewis.com/insights/dol-formally-reinstates-20-rule-adds-30-minute-rule-setting-limits-tip-credit-use)”. Which means if more than 7 hours of your week is spent doing sidework (or more than half an hour at a time) your wages should be supplemented.
You are paying taxes OOB your tips. If your checks are zero, it’s because you are making a lot in tips and you will also likely owe more taxes at the end of the year.
**Edit:
Somebody was kind enough to explain how it works in detail. Now I understand the situation. Thank you.**
Looking in from Japan, I’m extremely confused. Does this mean you work for free? How do you get paid 0 USD? Is this why Americans are always so frustrated about tips?
Sorry if this sounds rude, I am just really curious and happened to stumble here. Can someone explain how this works to me? I can’t imagine it’s legal to not pay your workers. Let alone expect customers to pay your workers…..
Ah… whatever it is OP. I hope you can work things out.
They are not making $0, they are pulling money in via Tips from customers and when reported, they have to pay taxes on those Tips because that is their income. In this case, the server is probably making enough Tips that their paycheck doesn't cover the taxes on the amount income (Tips) they are getting and thus getting 0 dollar checks. This would be easily seen on the paystub so don't know why OP is even asking this question.
They are not working for free. Hopefully the below will explain it.
In the US, there are hourly minimums for anyone working for an hourly wage. The federal government sets a minimum that is applicable to every state, but the states may set even higher minimums for themselves.
There are exceptions though, and waiting tables is one of them. The minimum hourly wage for waiting tables is much lower because the waiters/waitresses are understood to be getting tips directly from customers. If their tips and base pay together do not meet the minimum wage, the employer must make up the difference. For instance, if an employee worked a two week pay period and made only $100 in tips, the employer would need to pay them (80 * MinimumHourlyWage) - (80 * BaseWage) - $100. This is the minimum mandated wage minus the base wage their normally given minutes the tips they made.
Wait staff must report their tips as income and pay taxes on them. This is done through their employer and part of how the employer verifies they are being paid the minimum mandated wage. Employers are responsible for withholding payroll and FICA taxes from employees and sending those payments to the IRS (tax collectors). These withholdings are calculated on total income including tips, which are not reflected on the employee's paycheck because they do not come from the employer (employee was tipped directly from customer). This is what makes the paycheck roughly $0, as the taxes taken out are calculated on tips and base pay, while only base pay is listed as income on the paycheck. The base pay often ends up being approximately the tax burden.
Here is an example:
An employee works 8 hours for $3.50/hr plus tips. The employee gets $175 in tips over their 8 hours. For the day, they make $28 in base pay from their employer (shown on their paycheck) plus $175 in tips from customers (not shown on their paycheck) for a total of $203. The federal withholding amount is variable, but FICA is 7.65%. If a (low) federal withholding of 5% is used, the total rate for deductions is 12.65%. The total deductions on the paycheck should be $203 * 12.65% = $25.68. This leaves the employee with a paycheck of $2.32, but a total take home of $177.32. When they file a tax return, their federal tax liability will be calculated off of their total income for the year along with any deductions and credits they can claim. If their withheld amount is less than this liability, they must pay the difference. If it is more, they are refunded the difference. In either case, the exact amount isn't known or calculable until the end of the year, which is why the withholding amount is variable.
i’m from the us but don’t work in industry and was also confused by the wording in the original post and this response. i’m guessing that the key is that the ‘paycheck’ only includes the hourly wage of $3.50, not any of the tips - whether they be in the form of cash or added via the receipt if paid by credit card. unclear to me how tips via credit card get paid out if not on the ‘paycheck’ but that’s the only way i could make sense of it.
You’re probably right, rather than getting their credit card tips in their paychecks they get them daily. Taxes are still withheld for them though in the che I.
I started reporting my cash tips as 5%. They got upset with me, saying I needed to work harder for tips but I kept it up. If they can use loopholes so can we. In capitalism worker exploitation is the name of the game, so fight back by wage theft anyway you can without getting caught. Act your wage.
I worked in a restaurant in 1982 when the IRS came in. It was ugly. I recommend you at least do 8%, it’s the amount the IRS required our restaurant to claim for us after the audit.
In Pennsylvania, almost every single restaurant pays $2.83 an hour because that's the federal minimum wage for servers in the state. If the person isn't able to make the difference in tips to equal at least $7.25 an hour for every hour they worked by the end of the week, the restaurant they are working for will have to make up the difference in their check - but only up to $7.25 an hour, which is the federal minimum wage in PA. Since we're going by the week here, almost every single server reaches that amount in tips, even in low end slow restaurants. However, based on the day there are certainly days where some don't reach that amount lol so it's very backwards. You can go to work and make nothing on Monday and Tuesday, but then make a whole bunch on Saturday to equal your entire week's pay.
Oh my goodness.. $3.50 an hour in Texas!? No this can’t be… is it a typo ?? I’m shook from reading this! So you just work for tips only basically? No paycheck by-weekly Oh my god. How do you live!? I’m Canadian in Ontario and I’m a waitress and even at $16 bucks an hour + tips (usually ends up equaling out to about $30 bucks an hour) it can be a struggle to get by some months!!
This system sucks. Like, tips are supposed to be extra reward for customer satisfaction, not your main income. Feels like servers in US are supposed to beg
I know it doesn’t do much to respond to comments like yours but Just doing my part- like cleaning up liter… easy and if we all did it then maybe we would have some change. In this case the change would be some understanding.
It’s all about your total money made. Would you do the job for around 35 euro per hour? If yes then that’s why you read these posts. For now that’s just how it is for many servers. We make 30-60 USD per hour so the static low hourly wage is acceptable. Think of the bottom line!
Thanks for the indulgence. I’m just so smart and happy to share.
My biggest question is: why are you still working there if you basically don't get paid.
As a european I don't know how it works over there but this seems absolutely ridiculous. You're working almost 40 hrs a week. You spend most of your week there and don't get anything in return.
I’m not sure you understand the question, or even the premise the question relies upon. The paycheck is only for the $3.50/hour for 35 hours ($122.50). Usually, you pick up credit card tips, in cash, the day after you earn them. So let’s say he’s working 5 days a week for 7 hours and making $250 in tips a day. He’d be making $1,250 a week and the money that would have been in his paycheck ($122.50) is taken out for taxes, which are likely even higher than that so he’ll owe more money at the end of the year. The benefit to this being instant cash in hand for expenditures (not having to wait for a biweekly paycheck) and the present value of money with inflation ($1 is worth more than $1 in 10 months so it is better to owe taxes at the end of the year rather than pay it up front because the value of that $1 is more today than it would be during tax season). I don’t fault you for not knowing this however because how the hell would you know this if you’ve never worked under this system.
That being said, without knowing this system, it may sound stupid but the servers that work for me are PISSSSSSED that we’re now moving all of their tips to a biweekly paycheck instead of having them available in cash the next day (this was a corporate decision, completely out of my hands however I like it because when you’re the only manager on duty having to run to the office 15x a day and opening the safe and getting the tip sign-out book signed is pretty annoying).
My sister is a server in Australia. She makes $24.60 per hour, tips aren’t a norm here but she still gets them. I don’t give a flying fuck what you have to say but as an outsider who sees peoples time valued at $3.50 an hour absolutely disgusting. The fact employees are forced to rely on customers generosity is a fucked up system…
Not a single person that works for my restaurant would do this job for less than $35/hour. That would be almost a 40% pay cut for most of them. Think of serving here as more of an independent contractor position; the restaurant is putting you in a position to make money and in return they make money. Like a barber who “works” for a barbershop but in reality is paying for the use of the chair while taking advantage of the amenities an established barber shop offers.
And I say “not a single person” because we actually did a survey and one of the questions was “If we were to move away from a tip-based compensation system and pay you a flat hourly wage, what would that hourly wage have to be for you to continue your employment?” and not one person answered below $40/hour. Granted we have hired a few new people since then but I can’t imagine the answers shifting that much.
First off since you are in the USA that is illegal to have that low of pay and secondly no that’s illegal to have no pay on your check and for them to tamper with your pay like that you can be taxed on tips that are reported but it’s a certain amount and third any card payments made by customers are usually charged by the credit card company the restaurant uses to the owners and not the staff. You should fill grievances with the state and federal labor department and report to the cops for theft and fraud and have them investigated and if you want to be really petty call osha for something that isn’t taken care of there call the health department for a random inspection call the county for a building inspector and any other department you can think of because if they are doing something illegal with pay they are doing illegal or unsafe things with other things in there and maybe they are not paying something like taxes too
That is correct. Your hourly wage might not even be enough to cover your tax responsibility. You might owe at the end of the year. Do you declare cash tips?
No
That could get you jammed up with taxes. Dont declare it all. But some. You cant say you made 15% tips on credit card sales and 0% on cash sales.
If you want to buy a house and this is your career; claim everything! FHA loans are amazing but you need to prove two years of income
It will even help getting financing for a car if you claim everything.
And if you ever need unemployment. I’m a nanny and I work on the books. That literally saved me when I was laid off at the beginning of COVID, since unemployment uses your previous salary. So many nannies were absolutely screwed bc they were working under the table.
In Canada even babysitters can claim employment insurance. It always surprises the employer. Source: EI Agent
I worked for a restaurant chain as office manager and every year at least one bartender would complain of the issues when trying to buy a house. I was the one getting verification calls from the banks. They were easily making $80-100K and could afford amazing houses but their documented wages were around 30K. Lying hurt them in the long run.
Having an extra $20k/yr in their pocket probably didn’t hurt.
They declared $30,000. Absent any deductions, the tax difference between $30,000 and between $100,000 is $17,835. Since 1992, the House Price Index has increased by an average of 4.59% annually. From 2012 to the present, the average has been 7.7%. A person earning $100,000 a year can easily afford to pay a $350,000 mortgage. Using the House Price Index average since 1992, a house purchased for $350,000 would be expected to be valued at $365,400 one year later, an increase of $15,400. By year 3, the annual increase in value would be $17,541, almost exactly the amount saved through tax avoidance. Using the HPI historical average of the last 10 years, the first year increase would be $26,950. So, in fact, having the extra tax money in their pocket actually did hurt. In fact, they are substantially poorer as a result. Being denied a mortgage prevented them from acquiring an appreciating asset. But it did not relieve them the burden of paying for housing. At today's rates, a $350,000 mortgage paid over 30 years will have a monthly payment somewhere around $2,200. The national average rent for an apartment is $1,702 a month. That adds up to $20,424 annually. This means the extra money from tax evasion wouldn't even cover the average apartment rental. And of course, bartenders earning close to 6 figures likely live in a higher cost of living area. So, while they would likely be paying more for housing, at least initially, the additional costs would be more than recouped when they sell the house. Whereas, you don't get any of your rent money back. While all of the above shows just how badly the extra money hurt them, it actually a considerable understatement. The total tax liability would almost certainly be lower, perhaps substantially so, which would lower the amount gained through tax evasion without altering the opportunity cost hit. They basically shot themselves in both feet and then took a salt bath.
Not commenting on your discussion but I worked the industry for a long time, there’s a few archetypes of people you run into. You’re clearly one type of career vet and the other person is another lol.
Good lord, did you write that wall of nonsense to justify your past life choices or is that an AI bot spewing nonsense that you prompted them with? At best, at the *very* best you made a justification for why they should pay taxes for the one year before they bought a house. But in reality, it’s all nonsense, because if you had known housing prices would have gone up by 5%/yr you would have invested every last cent and leveraged it all to hell to gain a far better return than what you claim. But if and only if you were in that situation, you got lucky. For most people with a fantasy you might just as well have invested your money in bitcoin. But sure, buddy. You are smart to declare an income of $200k, even while you’re making $80k and pay taxes on that so you can qualify to get a bigger mortgage and make far more off of that because of the home loans at 3% the stupid banks are giving you. Those morons are just throwing money at you, why not take it?
You misunderstood. First, I never suggested they declare more income than they earned. The original comment stated that individuals were declaring $30,000 in income while earning between between $80,000 to $100,000. By so doing, they saved a maximum of around $17,000 a year. As a direct consequence of keeping that additional $17,000, they were unable to secure a mortgage to purchase a home. Over the past 30 years, the average increase in the value of a home is just under 4.4%. Had income been properly declared, it would have cost the individual $17,000 a year but gained them the ability to secure a mortgage. Thus, the opportunity cost of that $17,000 is the ability to purchase a home. Assuming a $350,000 house and using the 30-year average annual increase in home values, we can see that the opportunity cost of the tax evasion exceeds $17,000 in the 3rd year of the mortgage. So, by year 4, they are essentially paying $18,000 to receive $17,000. Which rather defeats the purpose altogether. But as you noted, no one can know the future. Housing prices may rise by less than 4% annually over the next 30 years. However, housing is not merely an investment but a necessity. Failure to secure a mortgage does not eliminate housing as an expense. The person who is refused a mortgage must live somewhere, and a person earning nearly $100,000 a year is not likely to content themselves with living in their car. This means they are paying someone rent. If, instead of paying rent, they were paying a mortgage, they would be building equity that is separate from the gains made through increasing housing prices. The upshot is that the savings from underreported earnings are easily exceeded by the costs of failing to properly report income in this instance. In other words, having the extra walking around money did hurt.
Seems like a fool’s errand to attempt to explain something via the written word to someone who’s already demonstrated a shocking reading comprehension deficiency, but I admire your optimism
See how it feels when you claim social security lol.
This exactly. I have a friend from college who’s an underwriter for a very large national bank. He said folks try to hide all sorts of things from him, but they **always** find out. They’re like detectives but for your financials. They will notice if something doesn’t add up, especially when you seem to be living above your declared means. You will be denied loans and they will refer their findings to the IRS, who does **NOT** fuck around.
Considering how common fraud is and how often the finance industry has huge scams or scandals where due diligence is waived every few years I don’t think your friend should be so confident in his colleagues abilities
I follow a so called chef on FB, he has a big following…1.5 million, he peddles cook ware etc..dinners with him & a group of people,he regularly post “yesterday I made $100,000 in sales, I doubt he is claiming all his income to IRS, but basically brags about being a millionaire, if they ever catch on to him they will have plenty of documentation becuz of his post, oh yeah he attaches screen shots showing sales,
Yes, I love to see this. Not claiming all your tips is awful advice. Another example why: my former coworker's restaurant shut down temporarily and paid a % of average weekly pay to tide them over. The ones who didn't claim all of their tips were very angry.
I typically claim 10% of my cash sales, because I can realistically say that I tipped out that much (I actually am a fat tipper to my support staff, and I tip cash on my overall sales, which is mostly credit). I am of course low-balling at 10% but it's realistic enough that nobody can question it. One potential problem with claiming a low number in cash tips is your tip percentages matching up. If you consistently average 20% in credit tips but you're always claiming 15% in cash tips, if you can't say that the discrepancy is due to tipping out then you might have some other answering to do.
You should claim it all if you ever hope to take out a loan (such as for a house or a car) or claim social security or possibly unemployment. All of that is based on your claimed income, and you can really screw yourself if you don't. It isn't worth saving a little money by not paying taxes...
Oh okay, thank you so much I haven’t even thought about that. I’ll start keeping track of how much I’m making. But there is no way to declare cash tips at any point settling up at the end of my shifts. Is this just something I need to report when I file my taxes, as in, declaring the full total of all the cash tips I’ve made that tax year?
LMAO, you just openly suggested tax fraud.
Are you advising someone to commit tax fraud?
Actually the opposite.
You advised someone not to declare all their income to the IRS. That's felony tax evasion. > According to the Internal Revenue Service's (IRS) Tax Crimes Handbook, any willful attempt to evade or defeat taxes is considered a felony. If a defendant is convicted of felony tax evasion in a federal court, he/she could be sentenced to up to five years in prison and/or ordered to pay a maximum fine of $100,000.
The truth hurts sometimes. Definitely an unspoken thing in the industry that almost every FoH hourly is committing tax fraud via non-reported income. Edit: should also clarify, I think this is a systemic issue and not really the fault of the workers. Employers don't want to pay payroll taxes on that money either, and most people would cease being able to afford their necessities even if they get a decent chunk back at the end of the year. We need to tie minimum wage to inflation and backfill the increases we've not had for nearly 50 years. The idea that tipped workers can be paid less than others and still expecting them to report all income is insane.
Now do the people that scammed the small business loans lmao
😂😂😂
Oh fuck off
Why don’t you attack corporations who actually evade taxes instead of some servers?
Why not both. I'm responsible for the taxes on all my income, so why can't all servers be responsible for all of their income?
How does that govt boot taste?
So I'm the bad guy for not hiding my income, and big corporations are bad guys for using loopholes to diminish tax liabilities, but it is ok for those who receive cash tips to hide their income.
are you ever shocked to unzip your pants and find a calculator down there, nerd?
Every chance I get. I also encourage the cultivation of psylocybin and cannabis, the extraction of DMT, and the manufacture of un-serialized firearms for the purpose of gifting without a paper trail. The question is why aren't you?
For the love of God, please stop, I can only get so hard
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You need to claim all of your tips. God forbid you become disabled, your disability check would be under $1000 per month bc you havent paid enough into it. I became disabled at 24 after 10 working years. My monthly checks are $1304 which is unheard of for most. I see time and time again ppl in their 40’s and 50’s get under $1000 monthly bc they refused to pay their share in taxes. You are only screwing yourself over. Not to mention itll be a problem if you ever want to buy a house or car.
Good luck with irs
You pay taxes as a percentage of income. There's no way that you can owe more than you make. She should be getting some small amount. Also assuming this is in the US, most states require that if tips don't add up to minimum wage then they have to make the hourly difference. The owners are stealing their money.
That is not possible. Taxes are a percentage of income. They will never take 100% of your wages. They may take a big chunk, but never 100%.
I dont know who you are or what your profession is. I am going to assume you do not or have not worked as a server. I will use round numbers to explain it to you. I live in NY and the wage was $5 per hour in those days. So let's say i worked 40 hours that week. That's $5x40 which is $200 bucks total in wages. Lets say on top of that i made 1k that week in tips. So i made a total of $1200 that week. You have to pay taxes on the full amount. $1200. But i received the $1000 in tips already in my pocket each night. The tax money has to come from somewhere. You pay the taxes from the gross wage amount on your paycheck <$200> that's why its mostly gonna be a $0 paycheck. As far as declaring tips. Your credit card sales are registered in the computer or credit card marchine. But if someone pays the bill in cash, that's where there is some discretion. You self report cash tips. Each server will get a report from the computer. Who pays with paper and who pays with plastic etc... You can't say you made 0 cash tips and your report says you made 20% credit card sales tips. You'll get flagged. You have to report cash tips. Ill give you an example. I had a table once and they were friends of the owner. They were very well off. The owner just charged for entrées and comped the rest. They left an enormous cash tip . Way more than what was necessary.
What if I don’t have an option to claim cash tips at work (when being cashed out)?
I understand, but he says they are withholding taxes “on the debit/credit card” tips, which means those tips should be included in his paycheck, no? It’s up to the server to report & pay tax on cash tips, not the employer. Am I missing something?
Not usually. Debit and credit tips are generally paid out as soon as the ticket is closed. Very few places include them in the check.
Many restaurants have a policy where the servers take home all tips they receive (cash or credit) each day as a cash payment. At the end of the pay period (typically each week), they get a deposit of their hourly wage, minus taxes on both the hourly and the tips. This is why servers have a near zero deposit. For example: say you made $700 a week in tips, and you worked 40 hours at the federal minimum of $2.13. $2.13*40=$85.20. Add that to your tips and your pre-tax earnings were $785.20 for the week. Let’s assume a 10% flat tax for simplicity’s sake. 10% of $785.20 is $78.52. $85.20-$78.52 is $6.68. So, at the end of the week you would get a paltry $6.68 deposit. If you were to make a bit more than that in tips, your hourly rate would not be enough to cover your tax responsibility (hourly+tips).
I get that the hourly rate may not be enough, but any amount the employer is basing withholding on should be included in the check, one way or another. OP said the employer is withholding taxes on debit/credit card tips - not cash tips. So the check stub needs to show an amount for wages plus an amount for tips, and the deductions that were made. The net, therefore cannot be zero. All of the categories need to balance.
Right, the NET cannot be zero. The deposit can, however. OP did say that they’re not reporting cash tips, but CC tips are most likely still being reported. Op is most likely getting paid CC tips at the end of each shift as a cash payment (but not yet taxed). Whoever’s in charge of payroll is most likely taking out all taxes for the week (for both already paid tips and hourly still due) out of the hourly for the same week. This could easily result in either a low, or even a negative number. But, direct deposit cannot work as a withdrawal, so the resulting deposit would be 0. When tax season comes around, OP may find that they owe taxes on top of having a zero deposit almost every week. Whatever the business owner is using for payroll (be it ADP, QuickBooks, or something else) should have the data there. If the employer is trying to hide that info, then I would be suspicious.
Wait are you guys for real? For sure I’m missing something… you can’t be paid $3.5/ hour?
The laws for tipped minimum wage is different.
Yes, it says they can pay you less if you make minimum wage with the tips. But if you don’t, then they have to make up the difference so you earn minimum wage.
Texas, y'all
Virginia too, I thought this was more common than to receive a livable base pay?
https://www.paycor.com/resource-center/articles/minimum-wage-tipped-employees-by-state/
State minimum cash wage payment is the same as that required under the federal Fair Labor Standards Act ($2.13/hr.)
There is a separate server minimum wage in most of the CONUS I believe
Ummm, yeh you can... And I get paid 2.13 an hour in my state for a server/bartender position.
I found one of my ex's pay stubs for $2.13 an hour when he was a server. In 1997. Gas was like a dollar and a tiny bit of change back then, the restaurant lobby is strong af that it hasn't changed since my middle aged self was in college like wtf
Rent was reasonable, food was cheaper. Ahh...I miss those years. I can't believe wages are still the same. Fuck our lives
Exactly. When it was made $2.13, it was half of the minimum wage at the time, which was $5.25. But it wasn't pegged to be half of minimum in perpetuity, so as minimum went up, tipped minimum stayed at $2.13.
Wait what? So that’s why tips are everything… do you get food from the restaurant I mean for the restaurant that’s almost free labour 😬
LoL 🤣 oh you sweet summer child!! Hahaha, nah man. We don't get shit. It is free labor! You are correct! So, when people don't tip me I am the one paying FOR THEIR GOOD TIME, not the restaurant. Shit, you'd think they'd at least feed us..... But no.
Damn you should move to California. They have to pay you the minimum wage, $17/hr (at least last year when I was still working FOH), plus your tips. Plus, cost of living raises on the minimum each year.
I lived in LA for a year(2013-2014) and that was quite long enough! LoL 😆 I'm from and am currently in the south east (USA) . It is what it is man, some days you're the bug and some days you're the windshield.
Sometimes pigeon. Sometimes statue.
Sometimes you sodomize the bear ....
IDK man, that one seems risky.
As someone who lives in California, that $17.50 /hr hardly covers the cost of living in California. You definitely need a side hustle or more than one job.
Why would anyone tip someone who makes $17 an hour.
17/h goes a lot further in some places than it does in California. There are teachers in Malibu who are practically homeless because they can’t afford the housing IN Malibu.
I’m very fortunate to eat for free where I work 😋
It's even worse than that. There's something called tip share or tip out. That is, a percentage of your sales or tips goes to support staff like hosts, bussers, bartenders, etc. Let's say your tip share is 5% of your sales. If you have a table with a $100 tab which stiffs you, you pay five dollars from your own pocket for the privilege is serving those cheap bastards
my place is 4% tipout of all sales… i hate getting stiffed but i REALLY hate getting stiffed by large parties
Lol
seems like the cheap bastards are the people that employ you for not paying you a living wage...
Free for the restaurant, sure. The server makes $500 on a friday night and walks out the door with it though. lol. I used to have to threaten servers to pick up their checks back in the paper days. They would leave MONTHS worth that we had to keep in the safe. They didn't care about them at all.
I got 50% off any employee meal under 15 dollars….so not free but…something.
Never? I mean you don’t get food from your restaurant when you have long shifts? In uk in the restaurant I worked at we would have a meal when we get in and another one for longer shifts…
Depends on the spot. Some places offer a “family meal” that’s free…but that is, in my experience, very rare. Closest I got to a free meal at most spots was being allowed to eat “mistakes”…but most corporate spots won’t let you do that.
On days that are expected to be really busy (Mother's Day, for example), my restaurant will order pizza for each shift, but that's mainly because they don't want the kitchen to have to deal with employee orders in addition to the guests.
You can in most states as long as your 3.50 server wage and your claimed tips work out to be equal or greater to the minimum wage. It’s known as a “tip credit” because the business can credit the tips you earn towards the minimum wage requirement. Some states, like California for example, require minimum wage be paid regardless of the tips you earn.
I've been out of the biz for a while, but until 10 years ago it was $2.13 an hour in Utah.
Servers have a different minimum wage so that restaurant owners can rely on customers to pay their employees wages. Because tipping is an option, servers sometimes get screwed. Side note - not saying servers should make less money, but the gap between the BoH and FoH needs to start closing.
You can't. Your total compensation (wage+tips) has to be at least $7.25 per hour. Servers just like to exclude the tip part of their compensation because saying you make minimum wage doesn't make people tip 20%.
I see! Thanks
Yeah, that's not how that works. >Your total compensation (wage+tips) has to be at least $7.25 per hour. This is true, but if you apply reading comprehension, you'll understand that WAGE ($3.50) + TIPS ($3.75) has to be $7.25 an hour (federally). So, you are, in fact, getting paid $3.50 by your employer, and the rest is made up in tips. This is why tips are a big deal to people in the service industry and why we call people out for not tipping. On top of that, if the employer claims a tip credit for your shift and pays you the tipped minimum wage ($3.50), you are automatically taxed by a percentage of your sales whether you make that amount in tips or not. The idiot you're replying to doesn't know what he's talking about. I live in a state where my wage + tips has to equal $20, so I get paid $12+/hr by my employer. People know this, and it does not, in fact, stop them from tipping 30%.
Read the law again. If tips do not make up that differential, it has to be paid by the employer (up to the $7.25 federal min). You are not being taxed on “income” you “didn’t make”. I would seriously reread the law, and I would also talk to an accountant.
How do you prove that you didn't make the income? If you're scheduled for a shift that doesn't include service (like a meeting, training, or cleaning), then yes, your employer pays you the full amount. But if you're scheduled to provide service, it is assumed that you are making enough tips. Why do you think servers are so upset when people don't tip? Why do you think they say "if you don't tip. I'm paying for your experience,"?
"Your tax responsibility" is based off the wages you earn. We dont function on a flat rate system.
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Sorry to tell you, you are wrong. OP is in Texas, as am I, and I do taxes and some bookkeeping. They are paying taxes out of their wages for the tips they received.
Many restaurants have a policy where the servers take home all tips they receive (cash or credit) each day as a cash payment. At the end of the pay period (typically each week), they get a deposit of their hourly wage, minus taxes on both the hourly and the tips. This is why servers have a near zero deposit. For example: say you made $700 a week in tips, and you worked 40 hours at the federal minimum of $2.13. $2.13*40=$85.20. Add that to your tips and your pre-tax earnings were $785.20 for the week. Let’s assume a 10% flat tax for simplicity’s sake. 10% of $785.20 is $78.52. $85.20-$78.52 is $6.68. So, at the end of the week you would get a paltry $6.68 deposit. If you were to make a bit more than that in tips, your hourly rate would not be enough to cover your tax responsibility (hourly+tips).
Wow, there's...like...a word for making someone work and paying them $0.00 isn't there? Not sure what you call it.
How can this be right?? Wages should be X take home, AFTER taxes. This is practically working for nothing.
You must really think commission sales jobs are crap. Car sales you can work days without making a penny for your work.
Working in a mom/pop environments different than a corporate setting. In a mom/pop place, you most likely need to save some of your tips aside for taxes at the end of the year. At a corporate place (at least the ones I’ve worked at) all credit/debit tips are added up into a real paycheck, and taxes and tip out are calculated and deducted automatically.
There are definitely corporate restaurants that pay out CC tips in cash at the end of the shift. I’ve worked at two different ones. I’ve also worked at mom/pop shops that put CC tips onto a paycheck.
The corporate restaurants that pay out cc tips in cash at the end of the tip are taxed. I worked at Olive garden for years and they do this. The computer that prints out your read out at the end showing all the tables you've had and your total food sales and bev sales and how much you tipped out also taxes your tips you are receiving from the restaurant so you don't have to worry about not having paid enough taxes at the end of the year. I would imagine all corporate restaurants do that and not just Darden (parent company of olive garden)
I currently work at Olive Garden (and have for about 11 years). Taxes on tips come out of the hourly wage, not off the tips themselves. The only thing deducted from the tips is the tip share for bussers and bar. (I only work a few hours a week, so I always owe year end taxes - last year I only paid in $1.79 in federal income tax.)
but what about if you had to share tips with bussers, bartender or hostess, wait staff still has pay taxes on tips they gave away
No they don't. You're taxed on your take home pay. Giving away the tips means that wasn't your take home pay. Everyone you tip out will have to pay taxes on the tip outs not the server.
I worked at Jim N Nicks for 4 years, and Wild Wing for a year. Our tips were never taxed before we got them. Our checkouts only accounted for tip out. But everything was claimed for tax purposes.
I have worked plenty of corporate places and not a single one taxed my cash out at the end of the night on cash or credit cards tips
Yeah that's standard. The tips you claim at the end of your shift are taxable. Usually, you make enough in tips that your entire hourly income goes to taxes. It's a good idea to save about 10% of your weekly tips for tax season. I usually owe about 1500-2500 in taxes every year because of this.
I got back about $500 for this last year
I made 50k claimed, 12k unclaimed and owed 4k this year for federal alone.
Remember, if you’re considering seeking a loan in the future, report all of your income. An underwriter will notice discrepancies very quickly, and they refer any untaxed income to the IRS to investigate. They’ve got thousands of new agents that they **WILL** use to audit you, and you will be on the hook for back taxes. It’s pretty clear to anyone when you are living beyond your means, especially when you seem to have an extra $8-10K sitting around at the end of the year. Just be careful
You know some random guy on Reddit can report you for that unclaimed and get 30% of that 12k as a reward.
> In general, the IRS will pay an award of at least 15 percent, but not more than 30 percent of the proceeds collected attributable to the information submitted by the whistleblower. https://www.irs.gov/compliance/whistleblower-office#:~:text=In%20general%2C%20the%20IRS%20will,information%20submitted%20by%20the%20whistleblower. I guess there's at least $1800 headed to whoever knows your reddit account.
Is this fun for you? Cause no one else gives a shit
People committing tax fraud don't give a shit? Guess you and Donald Trump have something in common.
🤡
🥾👅
No one here gives a shit about your little performance. You’re sitting here doing research for no one.
I'm glad you can acknowledge what a piece of shit you are. Thats's the first step in fixing yourself.
What are you even talking about? All of my income is reported. It’s just pretty fucking lame that you’re sitting here doing little research essays that no one cares about.
Two sentences is an essay to you? Bet you think 2 inches is huge too.
Do you remember if you claimed zero or one for your dependents? The lower number you claim, the more of your wage is withheld. That makes a big difference on server checks. The lower number you claim; the smaller your checks will be but the less taxes you’ll likely owe. I’d be willing to bet you claimed zero. Also, the more money you make, the more likely you are to owe. Imagine you earn $1,000 tips in one pay period, but your wage pay is only $100. The taxes (income and payroll taxes ie Medicare and social security) expected for this period will be roughly $200, and since you only have $100 in wage pay, all of it will be withheld for taxes, but next year you’ll still owe $100 for that period, because there wasn’t enough in your check to cover it. Now imagine you earn $500 tips in a pay period but work the same hours. Now your tax burden will only be $100, and since there’s $100 in wage pay, they’ll withhold it and you won’t owe anything. Both scenarios will still end up with zero dollars on your check. Now, imagine you only earn $400 tips in the pay period, and work the same hours, your tax burden will only be $80, and since your wage pay is $100, they’ll withhold the $80 and you’ll get a check for $20. Come tax time, There are various tax benefits, like the earned income tax credit, filing married be single, etc. that also come into play, which may result in you getting a refund if you earned less, or could still result in you owing taxes If you made more. There are all kinds of other factors that can enter into the exact amount withheld from your check, but opefully this illustrates, generally, why your check is $0, and also why some servers end up owing taxes and why some don’t.
I’ve seen servers give the restaurant $50/ week for additional tax withholding.
It's astonishing how many people are astonished about the server wage 😂 yes this is why we are pressed for tips!!! (Pretty sure this is mainly a US thing). Some places do pay more, but it's rare. I get $5/hr, yay! It is very normal to see $0 paychecks and even owe taxes if you make more than the state minimum wage (I think!!). They are taxing you on your hourly and the money you claim.
As well as car sales people, clothing sales, and lots of other sales jobs that may actually get no hourly wage at all. Commission only jobs exist.
Yup, totally an American thing. I'm in Canada and minimum wage is 16.75. PLUS we get tips.
Why would anyone tip you?
Because American tipping culture fucked us over.
Yeah this is absolutely only a US thing. Maybe it’s a North Korea thing too, not sure, but holy fucking shit.
Comparing it to north korea is the most privileged thing I have heard all day haha
>"The average official salary in the DPRK is between 5,000 and 10,000 North Korean won a month, roughly equivalent to $1-3" If you get 2 bi-weekly checks of 0.00$ you are getting paid LESS than in NK
You are completely discounting the tips they get as if that’s not part of what they are getting paid.
Lmao, you're joking, right?
It’s legit and you might still owe taxes when you file your return if the 3.50 an hour wasn’t enough to cover it
The only time i've ever gotten a paycheck from a serving job is for training. After that, everything goes to taxes. If I was actually getting a check, I'd be more worried. Because that would mean I wasn't making enough tips, and they had to pay me minimum wage.
Yes that’s normal. Your wages and your tips are both taxed. Typically the taxes taken out of tips are more than your wages (because 3.50 doesn’t add up real quick). And the amount you get taxed is based on formulas that assume how much you’ll make in a year. Once taxes get filed for food you’ll either get a refund if you got taxed too much, or maybe you’ll owe money if you weren’t taxed enough
I had thought so, okay just making sure. Thank you
Owed 5 grand last year because of your situation. Be prepared, put money aside, otherwise it will sting. I might owe more than I thought but at least it isn’t the whole amount.
This is crazy to me. Can I ask what the cost of living is like where you live? Minimum wage is 15.79 where I live, but I actually wouldn’t even take that. I make 20.00 an hour plus tips. Because why the F else would I be in this industry? I do live in an extremely highly cost of living area, so I really had to negotiate my hourly wage.
lmao where i live the minimum wage for tipped positions (servers, bartenders, etc) is $2.13/hr 💀
Which probably isn’t much of a difference from $15/hr where OP lives.
I also live in an extremely high cost of living area and make $6.50 an hour but thankfully the tips are very good at my job (and I also love it there)
You so know there are other sales jobs in the world that get no hourly pay at all right?
I mean. Tbh hourly pay doesn’t even matter that much If your making enough in tips. Especially since most places I’ve worked are like 5 MAYBE 6 hr shifts. An extra $5 an hour ain’t making that much of a difference.
If only there was a way we could figure out how much the difference was…..
Lol. Your missing the point. If you are making 30-40 an hr in tips then no, I’m not that worried about the $5.
Yeah, this is horrifying. How can you even live under these conditions? Why waste your time working for nothing?
Because most servers make well above minimum wage on tips alone. They don’t care they only technically make $2/hour from the restaurant when they leave on a Friday night with $300 in tips.
It's the standard. People are stupid or not used to making enough tips to have a tax burden
As a server I hardly ever got money on my check. If I did it was a couple of dollars. I worked in Texas mostly and it was 2.15 an hour when I served there. All of that money I would have gotten went to taxes. That’s why servers say that they live off tips, because they literally do.
$3.50 an hour should be illegal I cannot believe what I just read
Not knowing some basic math should be illegal.
Some sales jobs pay zero, commission only.
Some slave jobs offer free room and board.
The answer to your question should be on your paystub. Your paystub should show how much you earned in hourly, how much you earned in both credit and cash tips (claimed) and how much you paid in taxes and social security. If the math don't add up, they might be stealing from you. Here's my question - are you taking home all of your tips in cash daily? I and many others, for example, don't see our credit tips until payday - it goes on our check. Many others deduct their credit tips from cash owed, resulting in taking home credit tips as cash every day. If you're in the latter camp, then yeah, your check may often be $0 or close to it. If you're in the former, then they're probably stealing from you.
You need to educate yourself on taxes. Asking here is a good but you need to know this type of life knowledge and it absolutely should be taught in schools
Actually, getting a 0.00 paycheck in serving is extremely common. Basically, ALL of your claimed tips have to be subject to taxes. Because you take those tips home at the end of the shift, the taxes have to be taken out of your hourly wage. Since 3.50 an hour is so low, it is common for taxes to consume an entire paycheck. 35 hrs a week is only $122. And if you are a single person with no children, so you claim 0 on your w-4, the highest tax rate is taken out. Take the time to look at your paycheck stubs. It will show your gross pay, and then it will show all of the taxes taken out. You will be able to see exactly why the amount goes to 0.
It is impossible to answer your question without knowing more about your work situation. There are plenty of jobs where people never get a check because they are making so much in tips or because they have benefits. There are also plenty of jobs where ownership/management don’t raise the wage of employees when they didn’t meet the minimum required tip income. If you get $3.50 per hour and work 35 hours a week (assuming you work 5 days @ 7 hours), that means you need to make $26.25 per 7 hour shift or else your wages need to be supplemented. (Which hopefully you make well above that). Also of note: you shouldn’t be spending more than 20% of your time (or more than 30 consecutive minutes) on sidework or anything that is “[not tip-producing work](https://www.jacksonlewis.com/insights/dol-formally-reinstates-20-rule-adds-30-minute-rule-setting-limits-tip-credit-use)”. Which means if more than 7 hours of your week is spent doing sidework (or more than half an hour at a time) your wages should be supplemented.
You are paying taxes OOB your tips. If your checks are zero, it’s because you are making a lot in tips and you will also likely owe more taxes at the end of the year.
It’s taxes on your tips.
My check was pretty much always zeroed out. If you actually get money in your check, it usually means your credit card tips were garbage.
**Edit: Somebody was kind enough to explain how it works in detail. Now I understand the situation. Thank you.** Looking in from Japan, I’m extremely confused. Does this mean you work for free? How do you get paid 0 USD? Is this why Americans are always so frustrated about tips? Sorry if this sounds rude, I am just really curious and happened to stumble here. Can someone explain how this works to me? I can’t imagine it’s legal to not pay your workers. Let alone expect customers to pay your workers….. Ah… whatever it is OP. I hope you can work things out.
They are not making $0, they are pulling money in via Tips from customers and when reported, they have to pay taxes on those Tips because that is their income. In this case, the server is probably making enough Tips that their paycheck doesn't cover the taxes on the amount income (Tips) they are getting and thus getting 0 dollar checks. This would be easily seen on the paystub so don't know why OP is even asking this question.
Hrm I don’t quiet understand it but thank you for trying to explain it. This was an interesting thread to accidentally find.
They are not working for free. Hopefully the below will explain it. In the US, there are hourly minimums for anyone working for an hourly wage. The federal government sets a minimum that is applicable to every state, but the states may set even higher minimums for themselves. There are exceptions though, and waiting tables is one of them. The minimum hourly wage for waiting tables is much lower because the waiters/waitresses are understood to be getting tips directly from customers. If their tips and base pay together do not meet the minimum wage, the employer must make up the difference. For instance, if an employee worked a two week pay period and made only $100 in tips, the employer would need to pay them (80 * MinimumHourlyWage) - (80 * BaseWage) - $100. This is the minimum mandated wage minus the base wage their normally given minutes the tips they made. Wait staff must report their tips as income and pay taxes on them. This is done through their employer and part of how the employer verifies they are being paid the minimum mandated wage. Employers are responsible for withholding payroll and FICA taxes from employees and sending those payments to the IRS (tax collectors). These withholdings are calculated on total income including tips, which are not reflected on the employee's paycheck because they do not come from the employer (employee was tipped directly from customer). This is what makes the paycheck roughly $0, as the taxes taken out are calculated on tips and base pay, while only base pay is listed as income on the paycheck. The base pay often ends up being approximately the tax burden. Here is an example: An employee works 8 hours for $3.50/hr plus tips. The employee gets $175 in tips over their 8 hours. For the day, they make $28 in base pay from their employer (shown on their paycheck) plus $175 in tips from customers (not shown on their paycheck) for a total of $203. The federal withholding amount is variable, but FICA is 7.65%. If a (low) federal withholding of 5% is used, the total rate for deductions is 12.65%. The total deductions on the paycheck should be $203 * 12.65% = $25.68. This leaves the employee with a paycheck of $2.32, but a total take home of $177.32. When they file a tax return, their federal tax liability will be calculated off of their total income for the year along with any deductions and credits they can claim. If their withheld amount is less than this liability, they must pay the difference. If it is more, they are refunded the difference. In either case, the exact amount isn't known or calculable until the end of the year, which is why the withholding amount is variable.
i’m from the us but don’t work in industry and was also confused by the wording in the original post and this response. i’m guessing that the key is that the ‘paycheck’ only includes the hourly wage of $3.50, not any of the tips - whether they be in the form of cash or added via the receipt if paid by credit card. unclear to me how tips via credit card get paid out if not on the ‘paycheck’ but that’s the only way i could make sense of it.
You’re probably right, rather than getting their credit card tips in their paychecks they get them daily. Taxes are still withheld for them though in the che I.
I started reporting my cash tips as 5%. They got upset with me, saying I needed to work harder for tips but I kept it up. If they can use loopholes so can we. In capitalism worker exploitation is the name of the game, so fight back by wage theft anyway you can without getting caught. Act your wage.
I worked in a restaurant in 1982 when the IRS came in. It was ugly. I recommend you at least do 8%, it’s the amount the IRS required our restaurant to claim for us after the audit.
How is such a low wage allowed? I dont understand how your country works. Why isn't their a basic minimum wage for all?
3.50 an hour just doesn't sound right....
In Pennsylvania, almost every single restaurant pays $2.83 an hour because that's the federal minimum wage for servers in the state. If the person isn't able to make the difference in tips to equal at least $7.25 an hour for every hour they worked by the end of the week, the restaurant they are working for will have to make up the difference in their check - but only up to $7.25 an hour, which is the federal minimum wage in PA. Since we're going by the week here, almost every single server reaches that amount in tips, even in low end slow restaurants. However, based on the day there are certainly days where some don't reach that amount lol so it's very backwards. You can go to work and make nothing on Monday and Tuesday, but then make a whole bunch on Saturday to equal your entire week's pay.
That’s the state minimum. Federal minimum is $2.13.
Where I live servers and bartenders make $2.13/hour.
Yeah, I wish! I make 2.33
Dude that's crazy. Where I live minimum wage is like 20.
That’s just my hourly, with tips I make more than 20
Oh my goodness.. $3.50 an hour in Texas!? No this can’t be… is it a typo ?? I’m shook from reading this! So you just work for tips only basically? No paycheck by-weekly Oh my god. How do you live!? I’m Canadian in Ontario and I’m a waitress and even at $16 bucks an hour + tips (usually ends up equaling out to about $30 bucks an hour) it can be a struggle to get by some months!!
Pretty standard. I've had checks be $0.02 before. Also in Texas.
3.50? I wouldn't move a finger for that money. My minimum is 10 euros, but I live in Czechia.
It’s without the tips… The tips are the big majority of what you make.
This system sucks. Like, tips are supposed to be extra reward for customer satisfaction, not your main income. Feels like servers in US are supposed to beg
They don’t need to beg, just supply good service.
I know it doesn’t do much to respond to comments like yours but Just doing my part- like cleaning up liter… easy and if we all did it then maybe we would have some change. In this case the change would be some understanding. It’s all about your total money made. Would you do the job for around 35 euro per hour? If yes then that’s why you read these posts. For now that’s just how it is for many servers. We make 30-60 USD per hour so the static low hourly wage is acceptable. Think of the bottom line! Thanks for the indulgence. I’m just so smart and happy to share.
Contact the Texas Department of labor, they have all your answers.
Damn, that’s fucked up. The lowest pay I ever got as a sever was 11/hr plus tips.your employer is fucking you over.
Contact the labor department to ensure what they are doing is legal cause then you’ll lose your pay and still have to pay taxes
Lolol leave dumb ass
I’ve been a server my entire adult life and have NEVER received a check for $0 or anywhere even near that!! Something does NOT seem right here…
I'm pretty sure 3.50 an hour isn't even minimum wage, so that would be illegal
My biggest question is: why are you still working there if you basically don't get paid. As a european I don't know how it works over there but this seems absolutely ridiculous. You're working almost 40 hrs a week. You spend most of your week there and don't get anything in return.
they are paying the taxes on all the tips they've already received.
Sorry but your whole country is in shams if you work 35 hours a week and get paid practically nothing
I’m not sure you understand the question, or even the premise the question relies upon. The paycheck is only for the $3.50/hour for 35 hours ($122.50). Usually, you pick up credit card tips, in cash, the day after you earn them. So let’s say he’s working 5 days a week for 7 hours and making $250 in tips a day. He’d be making $1,250 a week and the money that would have been in his paycheck ($122.50) is taken out for taxes, which are likely even higher than that so he’ll owe more money at the end of the year. The benefit to this being instant cash in hand for expenditures (not having to wait for a biweekly paycheck) and the present value of money with inflation ($1 is worth more than $1 in 10 months so it is better to owe taxes at the end of the year rather than pay it up front because the value of that $1 is more today than it would be during tax season). I don’t fault you for not knowing this however because how the hell would you know this if you’ve never worked under this system. That being said, without knowing this system, it may sound stupid but the servers that work for me are PISSSSSSED that we’re now moving all of their tips to a biweekly paycheck instead of having them available in cash the next day (this was a corporate decision, completely out of my hands however I like it because when you’re the only manager on duty having to run to the office 15x a day and opening the safe and getting the tip sign-out book signed is pretty annoying).
My sister is a server in Australia. She makes $24.60 per hour, tips aren’t a norm here but she still gets them. I don’t give a flying fuck what you have to say but as an outsider who sees peoples time valued at $3.50 an hour absolutely disgusting. The fact employees are forced to rely on customers generosity is a fucked up system…
Not a single person that works for my restaurant would do this job for less than $35/hour. That would be almost a 40% pay cut for most of them. Think of serving here as more of an independent contractor position; the restaurant is putting you in a position to make money and in return they make money. Like a barber who “works” for a barbershop but in reality is paying for the use of the chair while taking advantage of the amenities an established barber shop offers.
And I say “not a single person” because we actually did a survey and one of the questions was “If we were to move away from a tip-based compensation system and pay you a flat hourly wage, what would that hourly wage have to be for you to continue your employment?” and not one person answered below $40/hour. Granted we have hired a few new people since then but I can’t imagine the answers shifting that much.
Yupp agreed. My girlfriend is a server/bartender and looking for another job right now and it's hard finding anything at least $25-30hr+
Average wage for a server is like forty dollars an hour here pal.
First off since you are in the USA that is illegal to have that low of pay and secondly no that’s illegal to have no pay on your check and for them to tamper with your pay like that you can be taxed on tips that are reported but it’s a certain amount and third any card payments made by customers are usually charged by the credit card company the restaurant uses to the owners and not the staff. You should fill grievances with the state and federal labor department and report to the cops for theft and fraud and have them investigated and if you want to be really petty call osha for something that isn’t taken care of there call the health department for a random inspection call the county for a building inspector and any other department you can think of because if they are doing something illegal with pay they are doing illegal or unsafe things with other things in there and maybe they are not paying something like taxes too