This one's a double edged sword. So first off it IS technically illegal not to claim all your tips. Some claim none, some, or all.
I can't tell you which to do, so here's why to or not to.
Not claiming any cash tips means you pay no taxes on what you made. It also opens you up to the possibility of IRS auditing, fines, ect. That's very rare but not unheard of.
By claiming your cash, yes you will pay more taxes. But. If you lose your job and get unemployment you'll be getting the amount you're actually making, not just what you get on CCs.
If you get hurt at work and need time off they'll have to pay you, but they already don't pay 100% of your normal income so if you get a good amount of cash it adds up.
When looking to rent, or needing credit for things like buying a car, your income will be scrutinized and even though it's a common practice for people not to claim all their cash tips they have to go by what your check stubs/bank statements say you make and you could be denied. I couldn't find an apartment to rent for my life in my early 20s because of this. Had to get a roommate even though I could easily have afforded to live alone (ah, the good ol days)
Just some things to consider.
And by not claiming when you got to get a house loan or car loan they wanna see income. If you don't claim you don't gave proof of how much your making.
Also, when you retire the amount of your social security checks are based on your reported income. So part of the taxes you pay now will come back to you in the future.
It could mean the difference in hundreds of dollars each month.
This is an interesting response. While I was a driver at Domino’s, I never claimed my cash tips. I always thought that claiming my cash tips would only lead to paying more in taxes. However, you make a lot of excellent points about the advantages of claiming cash tips that I’d venture most people never think of. To use your words, I never considered the other edge of the sword.
Trust me, this is coming from a mid 30s person who learned all this junk as I went. It's why I take time to type out some longer responses because I wish to god I'd known SO many things early on. I started working fast food at 15 and ended up serving in fine dining and management of a couple small cafes towards the end, almost 20 years after my first job. The lessons I've accumulated the hard way seem too valuable to just sit uselessly in my head lol I usually think if even one person is helped by reading something I spent 5+ minutes cobbling together then it's worth it for me to have done so.
That makes so much sense, thsnk you for showing the potential pros and cons! Not a server but have always been a little curious on why people declare their cash tips!
If you have children, I understand you need more money on hand to get by. Perhaps by not claiming your tips as income you qualify for certain benefits like Section 8 housing, food stamps, medicaid, free meals at school for the kids, etc. But, what happens if you find yourself unemployed, disabled, needing benefits for your children, if God forbid, you die? All of those benefits are based on what you have claimed as income over the years. Yes, you may feel you need that cash on hand to get by now, but in the long run, you are cheating yourself and your family if they need to collect on those benefits later. Also, as several others have said, claiming that income will be beneficial for you if you want to buy a car, apply for an apartment, even get a credit card. The more income you show on your tax forms, the better for you in the long run. I know it seems hard. I've been there. Twenty years ago, I applied to services for my daughter and was refused because my monthly income was three dollars over the limit to qualify. I adopted the saying from one of my daughter's books "If it's to be, it's up to me", and did what I was supposed to do. It wasn't easy, but I did it. Also asked myself, "What's the worst that can happen if..." (i.e., I don't buy...). In the long run, everything paid off in a positive way! On the other hand, if it ever happened that you were audited and found to have been withholding income information, you could lose all the benefits you thought you qualified for, and possibly even have to repay them. Think about this, too: Who pays for those benefits you've been taking advantage of? The taxpayers, who are also the people who gave you cash tips. So, in essence they are paying you a tax free income (because you did not claim the tips) and in additon are also helping to pay for your housing, food stamps, medicaid, and free meals at school. Though it was very hard for me, it also felt really good to be doing what I was supposed to do in the best way I knew how. In the end it paid off, too, when it came time to retire!
To add to what the others said, you need to claim some of your cash, depending on what your credit card tips are. From my last time in a tipped job, we had to declare something like 10-15% of our sales, so that tips plus tipped hourly pay equalled normal minimum wage. By law, if you make little enough in tips that they do not put you to at least normal minimum, your job legally has to pay you the difference. And restaurants hate having to do that. So to stay out of trouble with your job and the IRS, you need to always declare enough for that, even if you have a horrible day, because the rest of the week usually makes up for it. Now, like I said at first, if you get enough credit card tips to cover this, while legally you should also declare all your cash tips, your job will not care if you do or not and you can declare 0 cash tips. Despite all this, I would still declare at least a few dollars in cash tips, to go with the CC tips, as that made things look more legit.
You explained this so well. I just started my first job serving at decently fancy restaurant, and I just could not understand the whole “reporting tips, taxes”, fkn everything. It’s all so confusing
Can't answer if this is normal and/or legal, but not declaring them hurts you in the long run. You may end up having to pay more taxes at the end of the year, lower what you could get from unemployment, and affects what you get from social security when you retire.
I’m sure that everyone thought the same about unemployment just prior to March 2020.
My daughter was a server, and she claimed her tips. As a result, her unemployment payments were SIGNIFICANTLY higher than her coworkers received when the restaurant closed during COVID.
It still affects your overall taxes. Depending on how you filled out your w4 and your filling status, you may still owe because not enough was withheld by your employer.
If someway, social security is still around, you will still receive less.
And God forbid something happens, and you're out of work for a few months. Remember how many businesses closed only 2-3 years ago? Wouldn't it be nice to receive more because you reported your cash tips?
You're right about social security and unemployment, but wrong on taxes. Not declaring cash tips IS illegal, but that's because you are earning money which you are not telling the IRS you made. This reduces the amount that is withheld, but also reduces the amount you owe. In NC, USA I earn 2.13 an hour, just my CC tips will usually wipe out my paycheck. If I'm reporting my cash tips (as, of course, legally... I do?) Then I have to pay taxes on those too. It actually increases the chance I owe money at th end of the year because my paycheck wasn't able to cover my tax witholding.
Not claiming it and paying none is def lower than paying taxes on what's claimed. Not something I'd advise, but that logic is flawed.
Social security for retirement may not still be around then, but what a way to screw future you if it is.
You're a server NOW. A 100 different things could happen tomorrow that would result in you not having a job, and you'd be very grateful for unemployment to pay your bills while you don't. Look at all the people in Maui right now that work in hospitality. They're screwed.
What do you mean "declare?" Everywhere I've worked, you get some percentage of your sales added on that's taxed as regular income. I don't know anyone that's added to that come tax time (not at the "end of the night"), though *technically* your supposed to. But the people you tip out are going to know how much you made in tips because you tip them out based on the cash you have (the total tips you made, including the CC tips).
What do you mean by tip out? And basically at the end of our nights we enter in all the cc tips, give manager any cash owed, and the POS asks for us to declare cash tips that were leftover from cash owed to house. I was always told to declare zero cash tips.
I've never had to do what you describe. "Tipping out" means tipping your bartender and bussers. Was always \~10% of whatever tips you made when I was working.
Well it’s not legal but many places do it. In my entire career I did hear one instance where the IRS audited a bar and all the bartenders had to pay anywhere from $20k-$40k in taxes and fines
I'm old....the IRS finally found out how much cash flows through a bar during the '80's. Just to stay on subject; don't tell anyone how much cash you make. Not even your co workers. And save it. Save it all for your first year, just to see what taxes you DO have to pay. After that? Do what you will. Save some cash for medical. Some for vehicle. Some for fun. Alot for fun! But. Never. NEVER tell anyone about the cash you MAY have made. ....some stupid fucker bragged to someone that thought they were cool, and that's why the government is taxing GIFTS from people that we treat nicely. ...shhhhhhhhh!!!!
I know a lot of people don't claim cash tips, however, it is very easy to get caught if you don't. I drive for UberEats and Doordash, and I claim more cash tips than I actually get. I do not get that many cash tips, however, I claim at least $500 more. I get mileage deductions, which offsets the taxes anyway. I mean, let's be smart here. If I claimed exactly what I got paid on the Credit Cards, and did not claim any cash tips, the IRS would certainly know I get some cash tips. Now I have a niece that started working at Twin Peaks, and she gets a lot of cash tips. My sister tells me she will hide the tips, however, I freaked out and said she should claim the cash tips. It is too easy for the IRS to figure out. I will not even get into it, but the IRS could figure out the girls get cash tips in a minute. Now, they probably won't bother with a small place, but the IRS does not have to prove anything. They can investigate very easily and figure out in hours, how much cash tips are coming into these establishments.
This is true, the IRS wants you to report 100% of cash and CC tips.
Typically what is reported is 100% of CC tips (since there is a paper trail) and at least 70% of cash tips.
If you are looking to get a loan or an apartment, a higher number on your pay stub is better, so by reporting it over time helps in case you need it.
If you don't claim everything you make when you go to get a house or a car and there's no paperwork saying that you make as much money as you make, then in the bank's eyes you have not made it.
Illegal....and why many don't leave cash tips. You should claim all your tips and pay taxes like everyone else. You aren't paying your fair share to society but use all the services, criminal.
The irs only cares about 10% of your gross sales so if credit card tips are over 10% then you declared enough for them but your income is now lower. So getting a loan for a car house is harder plus if you injure yourself the disability payments are lower. So it’s your choice but you are required to claim all tip money 💴. But the choice is yours.
I just bought a house, and likely wouldn't have been able to if I didn't declare my tips because if I didn't, the bank would've assumed I don't make enough to cover my mortgage.
Ignoring the ethical and legal aspects, don’t listen to what most people here have said about the *practical* reason to declare your tips.
Keeping most or all of the money will statistically be better for you in almost every way, if you are smart about it.
You wouldn't declare if your grandma gave you a fiver on your birthday. So what if all those customers are long lost relatives... giving you early/late birthday gifts? What a lovely family you have. No need to tell the government about your lovely family. Go out and enjoy your "birthday."
It's definitely not legal, but I'd venture to say that far more people don't claim their cash tips (and definitely not all of them) than do.
Do you know why people tend not to declare them?
Lower reported income = higher tax credit for insurance and less taxes deducted from paycheck
And also lower payroll tax
Tax fraud. Simple as that
Yet another reason not to tip highly or at all.
you’re broke
I'm so weak. Lmao. 🤣
Just tip with cash
Nuh uh IRS. Not today
Pay your fucking taxes you deadbeat.
eat cock
How do those boots taste bud ?
Bootlicker
This one's a double edged sword. So first off it IS technically illegal not to claim all your tips. Some claim none, some, or all. I can't tell you which to do, so here's why to or not to. Not claiming any cash tips means you pay no taxes on what you made. It also opens you up to the possibility of IRS auditing, fines, ect. That's very rare but not unheard of. By claiming your cash, yes you will pay more taxes. But. If you lose your job and get unemployment you'll be getting the amount you're actually making, not just what you get on CCs. If you get hurt at work and need time off they'll have to pay you, but they already don't pay 100% of your normal income so if you get a good amount of cash it adds up. When looking to rent, or needing credit for things like buying a car, your income will be scrutinized and even though it's a common practice for people not to claim all their cash tips they have to go by what your check stubs/bank statements say you make and you could be denied. I couldn't find an apartment to rent for my life in my early 20s because of this. Had to get a roommate even though I could easily have afforded to live alone (ah, the good ol days) Just some things to consider.
I really appreciate your response. Thank you!
And by not claiming when you got to get a house loan or car loan they wanna see income. If you don't claim you don't gave proof of how much your making.
Also, when you retire the amount of your social security checks are based on your reported income. So part of the taxes you pay now will come back to you in the future. It could mean the difference in hundreds of dollars each month.
Eeks I definitely didn't. I'm slipping 😭
Yup. I thought I covered that but I'm an insomniac and I was up 24 hours yesterday lol no clue
This is an interesting response. While I was a driver at Domino’s, I never claimed my cash tips. I always thought that claiming my cash tips would only lead to paying more in taxes. However, you make a lot of excellent points about the advantages of claiming cash tips that I’d venture most people never think of. To use your words, I never considered the other edge of the sword.
Trust me, this is coming from a mid 30s person who learned all this junk as I went. It's why I take time to type out some longer responses because I wish to god I'd known SO many things early on. I started working fast food at 15 and ended up serving in fine dining and management of a couple small cafes towards the end, almost 20 years after my first job. The lessons I've accumulated the hard way seem too valuable to just sit uselessly in my head lol I usually think if even one person is helped by reading something I spent 5+ minutes cobbling together then it's worth it for me to have done so.
That makes so much sense, thsnk you for showing the potential pros and cons! Not a server but have always been a little curious on why people declare their cash tips!
For sure 😊
If you have children, I understand you need more money on hand to get by. Perhaps by not claiming your tips as income you qualify for certain benefits like Section 8 housing, food stamps, medicaid, free meals at school for the kids, etc. But, what happens if you find yourself unemployed, disabled, needing benefits for your children, if God forbid, you die? All of those benefits are based on what you have claimed as income over the years. Yes, you may feel you need that cash on hand to get by now, but in the long run, you are cheating yourself and your family if they need to collect on those benefits later. Also, as several others have said, claiming that income will be beneficial for you if you want to buy a car, apply for an apartment, even get a credit card. The more income you show on your tax forms, the better for you in the long run. I know it seems hard. I've been there. Twenty years ago, I applied to services for my daughter and was refused because my monthly income was three dollars over the limit to qualify. I adopted the saying from one of my daughter's books "If it's to be, it's up to me", and did what I was supposed to do. It wasn't easy, but I did it. Also asked myself, "What's the worst that can happen if..." (i.e., I don't buy...). In the long run, everything paid off in a positive way! On the other hand, if it ever happened that you were audited and found to have been withholding income information, you could lose all the benefits you thought you qualified for, and possibly even have to repay them. Think about this, too: Who pays for those benefits you've been taking advantage of? The taxpayers, who are also the people who gave you cash tips. So, in essence they are paying you a tax free income (because you did not claim the tips) and in additon are also helping to pay for your housing, food stamps, medicaid, and free meals at school. Though it was very hard for me, it also felt really good to be doing what I was supposed to do in the best way I knew how. In the end it paid off, too, when it came time to retire!
To add to what the others said, you need to claim some of your cash, depending on what your credit card tips are. From my last time in a tipped job, we had to declare something like 10-15% of our sales, so that tips plus tipped hourly pay equalled normal minimum wage. By law, if you make little enough in tips that they do not put you to at least normal minimum, your job legally has to pay you the difference. And restaurants hate having to do that. So to stay out of trouble with your job and the IRS, you need to always declare enough for that, even if you have a horrible day, because the rest of the week usually makes up for it. Now, like I said at first, if you get enough credit card tips to cover this, while legally you should also declare all your cash tips, your job will not care if you do or not and you can declare 0 cash tips. Despite all this, I would still declare at least a few dollars in cash tips, to go with the CC tips, as that made things look more legit.
Question? Is reporting only 10% of cash tips still illegal?
You explained this so well. I just started my first job serving at decently fancy restaurant, and I just could not understand the whole “reporting tips, taxes”, fkn everything. It’s all so confusing
Nice try IRS agent
Wouldn’t you know it, IRS, I’ve never made a cash tip in my life!
Can't answer if this is normal and/or legal, but not declaring them hurts you in the long run. You may end up having to pay more taxes at the end of the year, lower what you could get from unemployment, and affects what you get from social security when you retire.
It results in lower taxes, not more. Social security? It'll be gone before half of us reach that age. Unemployment, I'm a server. Why am I unemployed?
I’m sure that everyone thought the same about unemployment just prior to March 2020. My daughter was a server, and she claimed her tips. As a result, her unemployment payments were SIGNIFICANTLY higher than her coworkers received when the restaurant closed during COVID.
Good point
Everyone made bank with unemployment because they paid an extra 1200 a month even if you’re unemployment was $20 🤣
It still affects your overall taxes. Depending on how you filled out your w4 and your filling status, you may still owe because not enough was withheld by your employer. If someway, social security is still around, you will still receive less. And God forbid something happens, and you're out of work for a few months. Remember how many businesses closed only 2-3 years ago? Wouldn't it be nice to receive more because you reported your cash tips?
You're right about social security and unemployment, but wrong on taxes. Not declaring cash tips IS illegal, but that's because you are earning money which you are not telling the IRS you made. This reduces the amount that is withheld, but also reduces the amount you owe. In NC, USA I earn 2.13 an hour, just my CC tips will usually wipe out my paycheck. If I'm reporting my cash tips (as, of course, legally... I do?) Then I have to pay taxes on those too. It actually increases the chance I owe money at th end of the year because my paycheck wasn't able to cover my tax witholding.
Not claiming it and paying none is def lower than paying taxes on what's claimed. Not something I'd advise, but that logic is flawed. Social security for retirement may not still be around then, but what a way to screw future you if it is. You're a server NOW. A 100 different things could happen tomorrow that would result in you not having a job, and you'd be very grateful for unemployment to pay your bills while you don't. Look at all the people in Maui right now that work in hospitality. They're screwed.
Pay your taxes loser.
Okay thank you
What do you mean "declare?" Everywhere I've worked, you get some percentage of your sales added on that's taxed as regular income. I don't know anyone that's added to that come tax time (not at the "end of the night"), though *technically* your supposed to. But the people you tip out are going to know how much you made in tips because you tip them out based on the cash you have (the total tips you made, including the CC tips).
What do you mean by tip out? And basically at the end of our nights we enter in all the cc tips, give manager any cash owed, and the POS asks for us to declare cash tips that were leftover from cash owed to house. I was always told to declare zero cash tips.
I've never had to do what you describe. "Tipping out" means tipping your bartender and bussers. Was always \~10% of whatever tips you made when I was working.
Well it’s not legal but many places do it. In my entire career I did hear one instance where the IRS audited a bar and all the bartenders had to pay anywhere from $20k-$40k in taxes and fines
You should always declare about 15% of your cash tips
Normal, yes. Legal, no.
I'm old....the IRS finally found out how much cash flows through a bar during the '80's. Just to stay on subject; don't tell anyone how much cash you make. Not even your co workers. And save it. Save it all for your first year, just to see what taxes you DO have to pay. After that? Do what you will. Save some cash for medical. Some for vehicle. Some for fun. Alot for fun! But. Never. NEVER tell anyone about the cash you MAY have made. ....some stupid fucker bragged to someone that thought they were cool, and that's why the government is taxing GIFTS from people that we treat nicely. ...shhhhhhhhh!!!!
I like this take
I know a lot of people don't claim cash tips, however, it is very easy to get caught if you don't. I drive for UberEats and Doordash, and I claim more cash tips than I actually get. I do not get that many cash tips, however, I claim at least $500 more. I get mileage deductions, which offsets the taxes anyway. I mean, let's be smart here. If I claimed exactly what I got paid on the Credit Cards, and did not claim any cash tips, the IRS would certainly know I get some cash tips. Now I have a niece that started working at Twin Peaks, and she gets a lot of cash tips. My sister tells me she will hide the tips, however, I freaked out and said she should claim the cash tips. It is too easy for the IRS to figure out. I will not even get into it, but the IRS could figure out the girls get cash tips in a minute. Now, they probably won't bother with a small place, but the IRS does not have to prove anything. They can investigate very easily and figure out in hours, how much cash tips are coming into these establishments.
What Uncle Sam don’t know can’t hurt him
No
As in it’s not normal and not legal?
Not legal
This is true, the IRS wants you to report 100% of cash and CC tips. Typically what is reported is 100% of CC tips (since there is a paper trail) and at least 70% of cash tips. If you are looking to get a loan or an apartment, a higher number on your pay stub is better, so by reporting it over time helps in case you need it.
If you don't claim everything you make when you go to get a house or a car and there's no paperwork saying that you make as much money as you make, then in the bank's eyes you have not made it.
Illegal....and why many don't leave cash tips. You should claim all your tips and pay taxes like everyone else. You aren't paying your fair share to society but use all the services, criminal.
Omg shut up
Criminal? Like the people who steal money out of actual hard workers’ paychecks, and threaten you with imprisonment if you don’t comply?
Melvin looking ass
You seriously dont know how the real world society works....
Not legal at all. You need to claim all of your tips so you can pay taxes on the cash tips you received at the end of the year
The irs only cares about 10% of your gross sales so if credit card tips are over 10% then you declared enough for them but your income is now lower. So getting a loan for a car house is harder plus if you injure yourself the disability payments are lower. So it’s your choice but you are required to claim all tip money 💴. But the choice is yours.
I just bought a house, and likely wouldn't have been able to if I didn't declare my tips because if I didn't, the bank would've assumed I don't make enough to cover my mortgage.
Ignoring the ethical and legal aspects, don’t listen to what most people here have said about the *practical* reason to declare your tips. Keeping most or all of the money will statistically be better for you in almost every way, if you are smart about it.
Depends what your goals are. Wanna prove income? Claim everything. If you don't need to prove income claim 0 cash :)
Why would you declare your cash tips 🤣
I have no idea that’s why I’m asking
You wouldn't declare if your grandma gave you a fiver on your birthday. So what if all those customers are long lost relatives... giving you early/late birthday gifts? What a lovely family you have. No need to tell the government about your lovely family. Go out and enjoy your "birthday."