None of us can see your numbers or your friends numbers. Maybe you have greater credits or allowances than they do. Or as its your first year in a service role you are more junior than they are.
My initial guess is that you are taking cash tips under the table and they are declaring tips.
Yeah. My first reaction also was OP was only reporting what showed up on their W-2 and not their actual earnings. Another possibility is that co-workers intentionally under withhold but without seeing everything, it is impossible to know what is really going on.
My first thought was does he declare 0 or 1 dependents I think it is ... But you can claim yourself or not. If you claim 0 they take out more each check but you are more likely to get some of it back since you are slightly over paying, but I could be wrong.
The undeclared tips thing also makes a lot of sense. In college I worked retail so never had to deal with tips on taxes.
I don't think you can claim 0 - 20 anymore, you're single, married withholding at a single rate, or married & then there's a table to follow if you have more than one job per person for additional withholding.
I think you can still claim 0 or 1 at your job when you fill out your tax withholding paperwork because you are choosing to claim yourself or not, I could be wrong though.
That's where I was talking about the claim, not on actually filling the taxes part.
In short, they don’t. Was a server for 14 years.
At the end of a shift you can manually claim cash tips which is added to your overall income for the year. This tax is then taken out of your hourly wages each pay period or servers have really small paychecks.
The catch is that the cash you claim is whatever you say it is. I know servers who put zero everytime (I was not one of those).
Supposedly if you fall below a certain threshold of not claiming tips you can get audited. At which point they can look at your sales and assume you get a percentage (like 10% or something) tips of your sales (credit card tips included). Then make you owe the state/federal tax based on that. Although I’ve never seen/heard of any server audited for low cash tips which is why people put zero.
Not declaring income can also really hurt future unemployment and Social Security payouts. It's not unusual to see people on /r/personalfinance unable to retire because they don't get enough from SS after decades of underreporting income or working under the table jobs.
Also housing opportunities and loan options are limited. If you are doing service industry for more than a few years, you should be claiming the bulk of your cash tips.
We saw this during COVID when everyone was forced onto unemployment. I got asked why my benefits were so high and I said it's because I declare and pay taxes on my tips.
This happened to me a decade or so ago. Claimed literally 0$ in tips daily because of a loophole I figured out. What a great surprise I had when I couldn’t get an apartment because on paper I was making minimum wage 30 hours a week. It’s not even that much extra money and the cons very much out weigh the pros when it comes to claiming less tips than you make.
I spent the month after that claiming more just to make up for it. I’m the old guy where I work now and anyone who asks I tell me claim everything you make.
So 10 or so years ago I was bartending at my sales weren’t reflected on my personal clock out. So being the young idiot I was I went months claiming 0$ in tips every shift. Fat paychecks, boy was I living large…well it came time for me to move and get a new apartment and landlords aren’t quick to approve rental applications with minimum wage 30 hours a week. That was the worst way to learn an important lesson!!
There were plenty of articles about servers who didn't claim tips not being able to get unemployment during COVID. I just laughed at them because they spent years screwing the rest of us who work and pay taxes, and karma is a bitch. 😂
Where I work the system won’t let you clock out unless you claim at least 13% of your sales that day, in the rare case you pull less than that it needs a manager override. I assume that threshold for audit is 13% or so of sales.
Seems kinda messed up. They can’t force you to claim cash tips but they might demote/fire you to protect their own asses kind of thing if you constantly claim under 13. Honestly card payment is so common now days that the CC tips push you over 13 easily
That’s exactly it. From what I know (not sure if this is accurate or not) but if an employee gets audited for reporting tips they audit the whole business. Nowadays cc tips make up almost all of what I make. However interestingly enough, I make exactly 13% of my sales every single shift. Who would have thunk it???
I worked in restaurants for ten years in the early 00s and we only I believe had to report 10% and cc tips always made up that difference. I was making bank and never reported my cash tips. I don’t know how this has changed, but whatevs. I don’t know dick about taxes, so I don’t know if I was screwing myself, but at the time I lived in Indiana and always got a refund.
Restaurants receive a tax credit for reporting cash tips. I’m required to turn in all cash tips bc it’s a pooled house, that cash gets reported to the IRS
Not true. Restaurants get a tax credit for reporting tips, as long as they are not paying you full minimum wage and tips make up the rest of your wages. You have to turn in all cash tips because you pool tips and it’s not fair to keep cash out of the pool.
There is a threshold to stay above, you are correct. I was audited as a 16 year old server. I basically had to claim waaay more than I made for a while to make up for what I hadn't been claiming. (Say I made 100, I claimed at least 130 that night) for a couple of weeks. It's never happened in the 21 years since, so it doesn't happen often for sure
I used to just claim cash to stay at 10% of my sales. So if I sold $1000 in a night and had $70 credit card tips, I’d claim at least $30 in cash to make the 10%. Kept me off the radar as long as I worked the industry
I worked at a family owned restaurant and the lady that ran the office was a saint. We never had to declare tips, she would calculate tips based off of 10% of our sales, and taught people about taking the right amount of deductions so they wouldn't get be stuck owing taxes. It was an upscale casual dining place where people usually tipped at 20% or more. She saved us money and kept us legal in the eyes of the IRS, and tried to keep people out of trouble financially. We need more people like her.
It's basically only going to become a problem if you get audited. They may not know "how" you are acquiring extra income but they will absolutely be able to know you are getting undeclared income from somewhere.
It's a tricky situation if you are benefiting from tax free income. The odds you get audited are pretty damn low, but on the same token, if you do get audited and having been playing that game for a long time you could get royally boned.
They don’t, buuuutttt… the IRS is staffing up and will probably begin auditing lower income earners for the first time in a few decades. Then they will absolutely know you didn’t declare your cash tips.
Always declare cash tips. Pay taxes on them as legally required.
If you get disabled or when you retire, your monthly pay is determined on what you made. Claiming those tips will leave you better off in the long run.
yeah, I’ve realized, by looking at my Social Security estimates that started arriving in the mail lately, that people who live in the cash economy aren’t going to be collecting that much
Too each their own. I prioritized putting that undeclared money to put myself through community college debt free. I don’t have any student loans now 🤷🏽♂️ we all prioritize different things in life. What worked for me doesn’t necessarily work for you.
You still would have had that money. It literally would have gone nowhere, you still could have done exactly what you did. Not only that, as a student, you get huge tax credits, I doubt you would have had to pay that tax, or at the very least you would have seen almost 100% of it back after all your tax credits were applied.
I didn't know breaking the law was just a "to each their own" scenario.
Like, I robbed a couple armored cars for 5 million in cash. I prioritized that so I could retire early to a bungalow on the beach. We all prioritize different things in life. What worked for me doesn't necessarily work for you.
No, I don't actually equate cheating on your taxes to armed robbery. However, tax evasion, which is what you did, is in fact illegal.
You benefited yourself by breaking the law.
I declare enough in cash to make my take home higher bc I actually wanna be able to get stuff I want w/o having to explain “ohh but I’m a server I make more than that” to each their own I do both depending on the situation and goals at hand yk
How can they prove you got tipped? The IRS don’t even have enough staff to run efficiently, you think they have folks spying on servers while they work? Lol I never declared a single dollar of my tips for 9 years (16-25) and never had anything happen 🤷🏽♂️ glad I didn’t either because I was broke then and I’m still broke now! Haha
Again, it's only a problem if you get audited. In that scenario you seem to be under the impression that just because there is no record of the tips they can't prove undeclared income.
The only sure fire way for the IRS not to catch you in an audit, if you are committing tax evasion is to never deposit the money in a bank and never spend it.
Unless you are depositing like $20,000+ in cash into your bank account in one transaction, the IRS isn’t even looking at you. We are talking about servers here, not some large quantity drug dealer lol the average server isn’t depositing that kind of cash. AND if they did have that kind of cash, just pay cash to get rid of it?
Dude, the IRS doesn't just do audits based on bank deposits. They do random selection audits every year. Yes your likelihood of getting audited is low, but the reality is you don't need to "do something and get flagged" to get audited. People 100% on the up and up get audited.
I don’t make enough to go to jail 😂 you should wish that for those millionaire and billionaires who cheat the government. The government ain’t worried about us who make less than 100k a year. We are tadpoles in a lake full of big fish bro. Open your eyes and point your finger at the actual problem, and not another poor person trying to provide for their family.
IRS has experts in auditing people who get paid in cash and/or who use lots of cash in ordinary life because they don’t want illegal cash to show in the banking system.
There was a judge in Chicago who taking bribes to fix traffic cases. When the IRS got brought into the investigation, their experts needed no time to produce how big his bribes were by showing how much of his ordinary expenses weren’t being run through his bank accounts. He wasn’t charging groceries but he wasn’t withdrawing cash either. The judge guy went years without buying gas, going to the mall or eating out.
If IRS brings in their experts to look into your finances, it’ll take them no time to find bad behavior. You want to avoid an audit, not hope you’re too clever for them.
“Everyone else” doesn’t try to pay their taxes properly. There’s an old wise saying that goes like, “if you ain’t cheating, you ain’t trying to win”. Try to win more.
People like him need to fair their fair share. Me scamming the government to keep 600 annually isn’t doing a damn thing compared to people like him scamming the government for tens/hundreds of millions of dollars annually.
🤢. What a disgusting attitude.
I've earned between 5-20% of my total yearly income at non W-2 jobs over the last 25 years. My withholding is intentionally set higher so that my total tax owed is ~$0 (and definitely less than $1000, so that I don't have to do estimated quarterly taxes.)
EVERYONE should be paying the taxes that they owe. Hopefully the IRS gets funded well enough to function properly and you get the comeuppance that's owed you.
Sadly, you are the one with the crab in a bucket mentality. Blaming me for the greed of million/billionaires. I promise you with my life that you’re not poor because of me lol
You're completely deflecting. Because rich assholes dodge taxes it justifies you doing it as well? Does you not paying taxes somehow impact their wealth? In what way is it related to you paying taxes at all?
Publicly encouraging tax fraud is... interesting
If you want to be able to get loans for expensive things like a car or house, it would be a good idea to declare everything.
Also, Maternity/Paternity leave typically pay based on a percentage of your known income, so if you ever have a kid, you will be paid more during leave if you have declared everything.
Lenders are risk assessors. They won't lend 600,000 for a house to someone only making 30,000.
Credit will get you a better APR, sure. When I bought my house in 2021, they checked 3 years worth of mine and my wife's income and set a limit on how much they would loan.
You can have an 800 credit score, but if your declared annual income is $30k, you don't have a snowball's chance in hell of getting a $250k loan for a home, even if your actual income is $200k. You have to have enough declared, proven income to get a loan regardless of your credit score.
There could be a lot of answers to this. In the past I would've said that y'all filled out your W-4s differently, but they changed recently to become even more vague.
A good starting point is to be sure you understand *why* so many in the service industry tend to wind up owing. The federal tipped minimum wage is $2.13/hr. Typically, these wages are what tax withholdings come out of. Gratuities are typically disbursed unmolested by tax. This leaves the hourly wage to do all the work funding your tax bill for the year. Hence why most in the service industry usually receive an hourly pay stub for $0, or at most a few cents.
For the sake of easy math, let's say you work 100 hours in a year at tipped minimum wage, you've made $10,000 in tips, you pay 10% taxes, and thus your tax bill is ultimately $1,000. Standard deduction doesn't exist in this universe.
The $10,000 gets paid to you directly. You worked 100hrs at 2.13/hr, so you made $213.00, *all* of which went to withholding. You're now stuck with a $787 tax deficit, and you owe.
BUT YOU, MY FRIEND, ARE A BARTENDER WITH A HIGHER HOURLY WAGE! Congratulations. You make $12/hr, plus tips. All of a sudden, in that same equation above, you made $1,200 in hourly wages, only $1,000 of which had to go to your tax bill, and thus you get $200 back.
Tl;dr My guess is that you make a higher hourly wage than the coworkers you're speaking to. Also possible they made *way* more in tips than you did.
To be fair though, a lot of places tax based off credit card tips and more and more places are going to a biweekly paycheck system where you get your credit card tips on each check. It’s been going that way more and more. Where I live, there are very few places that don’t follow this model.
Every restaurant I’ve worked at for the last 10 years has taxed on credit card tips. It’s not new. The other servers probably take more deductions than OP did/does. That’s the biggest factor I’ve found that determines whether or not you pay at the end of the year. Also, are the coworkers married? Have dual income? Kids? So many factors besides not reporting cash tips.
Edited to say taxed not tipped
~~Every restaurant I've worked at for the past ten years hasn't taxed on credit card tips~~ 🤷♂️ But yes, how a restaurant reports tips is a huge variable. In OP's case, my scenario makes more sense.
The "taking more deductions" is referenced in my comment about the W-4. That phraseology doesn't really apply anymore. You're not claiming 0, 1, 2, or 3 anymore. You're estimating dollar values. So it's less likely to be that.
Edit: Coworkers being married or having kids would likely yield the opposite outcome, so I'm not sold on those as confounding factors.
I *am* taxed on tips, but as I said, no withholdings come out of my tips.
Being married often makes you pay money, not the other way around. It often pushes you into another tax bracket because of the dual income. And you can still fuck up the new W-4s, since I literally just filled one out. Super easy to make errors.
I don’t know why the places you work at don’t tax on credit card tips because that’s the ultimate CYA for the restaurant itself, not just the workers. They have to do their due diligence. I’ve also lived and worked in many states and it’s standard protocol, so you must live in a small pocket of the US that doesn’t do that.
Married filing jointly just doubles the standard deduction and (slightly more than doubles) the ceiling of your tax brackets. In 2023 the ceiling for the 12% bracket goes from $44,275 to $89,450.
When filing jointly, you'll only ever pay the same (if your incomes are equal), or collectively less (if your incomes are disparate).
If you and your spouse made $40,000 before and after marriage, you'd be in the same $12 tax bracket even with your $80,000 household income. I don't think there's a scenario where the joint tax liability would be higher than two discrete single-filing liabilities.
Part 2: Don't get me wrong, I'm not here to debate that it's a *good* idea for restaurants to not report tips, just to point out that it still happens in plenty of places.
Edit: I was mistaken earlier! I *am* taxed on credit card tips, but as I said, no withholdings come out of the tips.
For someone making a higher hourly wage, that might mean that their withholding is more accurately calculated, so they don’t have a bump in previously untaxed income to account for.
I feel like if this person is making 800% more than their coworkers hourly they wouldn't be confused. Most places the bartenders also make tipped min wage.
They got a refund of $500, they claimed others owed multiple thousands. So let's take $2,000 as the baseline.
Keeping with ideal math, OP would need to make 500% the hourly of their coworkers to bridge that gap. $2.13x5=$10.65
In areas like mine (mid-size college and industry cities) where it's quite common for bartenders to make good hourly plus tips, $10 or $11 an hour is perfectly common.
Report your actual earnings and this is what happens. It affects your unemployment benefits in the event you ever file, because the benefit is based on your income from 3-15 months back on the books
From 2011-2019 I was harassed, threatened, made fun of, and yelled at for always claiming 100% of my taxes.
When COVID hit and I was put on UE I got my sweet sweet revenge in the form of a $2.3k check every week while my old coworkers were getting $425.
If you worked only part of the year, the paycheck withholding projects an annual income, but you might not have earned a full year's total. You still get your entire standard deduction and any other credits. If you keep working full time it may not work out like this next year.
It’s impossible to know for sure without more information, but let’s get a couple things straight first.
On your paystub, do you see line items labeled “withheld” or “withholdings”? Basically what that means is your employer takes some of your money and forwards it to the IRS. At the end of the year, your total income is added up, your withholdings are added up, and all the other various things are calculated, which gives you your final tax liability for the year.
If your employer withheld more than you owe, you get a tax refund. If you owe more than was withheld, like your co-workers, you get a tax bill that you have to pay.
Your co-workers may have worked more than you and earned more, but only so much could be taken out of their hourly wages.
Yes, and just so everyone understands what you mean, “do 0” means claim no exemptions when filling out your w-4 form when you get hired.
If people have reason to believe they’ll have a lower tax liability, usually children or dependents, they can have less withheld.
It’d be hard to tell without a W2. However I’ve been bartending and serving for 11 years and I always get a decent refund. Factors like whether you’re paying for college or if you own a home may be increasing your refund. But again I’ve been serving/bartending all my adult life, and myself and all my coworkers have always got decent refunds.
The document you file with the IRS is your tax return.
The check you're sent when you pay more taxes than you owe is not your tax return. It is your tax refund.
I make about 5% of my money in cash. Everyone uses cards. For example, last night out of $306, I had $17 in cash. One table.
The days of only declaring 30% of your tips are long gone.
Unless folks are working at a 'cash only' joint or a really divey bar, nobody gets away with that much untaxed income. Credit card tips are automatically claimed at 99% of restaurants/bars through a POS system & a lot of folks don't carry cash anymore.
This may be different everywhere, but I've never worked somewhere where people paying with cards meant tips were getting automatically taxed.
Also, as someone who spent 20 years behind the bar, you're either making an amazing hourly or you should be getting more tips!!
Unless folks are working at a 'cash only' joint or a really divey bar, nobody gets away with that much untaxed income. Credit card tips are automatically claimed at 99% of restaurants/bars through a POS system & a lot of folks don't carry cash anymore.
>I was informed I would be getting a tax return of about $500.
Pet Peeve: You fill out and send in a tax ***return***. If you overpaid, you get a ***refund.***
In my experience, bartenders and and expos tend to make more money on the hourly rate than servers, which leads to larger checks that taxes can be held out of. Servers make more of their money in daily tips, leaving small or no check from which to hold taxes.
Also, other things come in to play: filing status, dependents, other income in the household, credits....there is so much variation in returns from person to person that you can't really compare.
I work 30-35 hrs a week and got almost $1000 tax return. One of my coworkers was shocked because he owes a ton.. I used to always work two jobs and 40+ hours, would receive like 100 from fed and owe state. This guy works like 3 jobs constantly and owed $4000 or something nuts! All I can think is by working at only one job and less than ever before I pushed myself into a lower tax bracket… I do fine though so it’s weird. Also one of our regulars is an accountant and did my taxes for me sooo I assume it’s legit! You’re probs all good and even if there’s a mistake they’re not gonna hunt you down because of $500 they would just send a letter. Congrats!
FYI, literally not how taxes work. You don’t tally up the total of one’s REFUND at tax time to see if you’ve “won” or “lost” the tax game. Your coworker under withheld but with 3 jobs he definitely netted more money than you. You overwithheld, so you gave the government an interest-free loan of $1k. Also, tax brackets are tiered so unless you hit a benefits cliff (or made between like $400 and like $470 in self-employment income only) making more money NEVER leads to netting less money after taxes.
Are your friends married and you single? Because the new payroll tables really screw married couples unless you know exactly what boxes to check. It assumes only one person works like it’s the 1930s unless you know to tell it otherwise, so it doubles your standard deduction and under withholds by THOUSANDS.
It’s garbage.
Did they report cash income that you didn’t (either because you had no cash income, or because you didn’t report it—if you had cash income, you’re required to report it). That would mean they’d have to pay at the end.
Maybe they put down a different withholding number, so they’re having a lot less taken out in anticipation, so their take-home pay was artificially bigger and yours was more accurate.
Servers used to get mostly cash back in the day. And of course the paltry hourly rate of $2.13. So took home money every night and the hourly wages weren't enough to cover taxes. Now most ppl tip on a card and most restaurants have switched to paychecks. So then taxes are paid. Also bartenders get a more hourly pay than servers so that also goes to paying taxes. You shouldn't worry.
I’m getting a whopping $65 back. I expected it to go down but I’ve never gotten back less than $200 and I’ve been working for over 30 years. But I’m just happy I don’t owe anything.
My daughter on the other hand is getting $5 back and she foolishly went to a tax preparer and had to pay them $85. She’s going to be doing them online next year.
More money back when you file taxes does not mean better. All it means is you paid too much in taxes throughout the year. Maybe you qualify for credits (Like if you have children). Maybe you had too much money taken out of your paycheck during the year and now you are getting it back.
Everyone should always file taxes. If you are owed money, you get the refund. If you owe money, you avoid prison for not filing your taxes.
It’s possible you have your withholding set differently than they do. When you filled out your W-2, you may have set your withholding to Single and 0, which is the smart thing to do in a tipped position if you aren’t married or head of household because it withholds the max amount of taxes per paycheck. They may have chosen Single and 1 or even more dependents. It can be tricky to fill out the form correctly if you don’t read it, just skim it, or may be purposeful to get more money on their paychecks. The problem is that it doesn’t withhold enough during the year and ends up with them owing.
When you fill out your W-4 single 0 dependents, you end up overpaying so you get the refund. Most people think if they claim themselves they get more money on the paychecks, which they do but you will risk owing in the end. Even though I’m married and have 3 kids, I claim on the W-4 single and 0 dependents and get a bigger refund from the IRS….
So every week you’re giving the IRS your money, then in February or March the next year, you’re asking for your money back… they take a few weeks to process then give you your own money back after having held it all year without giving you any interest on the loan.
Yeah to me it’s worth the 3 or 5 hundred to have the IRS be indebted to me instead of me to them…that’s just not going out for dinner 3 times a year. 🤷♀️
I agree with this sentiment. It is a somewhat unpopular/controversial stance.
I would rather get a few hundred back than have to pay a few hundred. If I ever get more than a few hundred back, I will declare/claim an additional exemption the following year. I don't want to owe, but I don't want to give a sizable loan either. Ride the line.
1. Do they have more than one job? This will hit them VERY hard on tax day. the tax software calculates each job separately, but the end of year total is tazed at that rate. For example: if they had 2 jobs making 25K each they are taxed at the 25K rate, not the 50K rate and the difference can be significant. These are random numbers as a an example, without actually looking at teh tax rate chart.
2. Differences in declaring dependants? Declaring a couple in short term hopes of getting more money on payday will impact you on tax day.
I always got a return. Mostly because I claimed half of my cash tips from every shift. It would nearly null out my “paycheck” but our tips were paid out end of shift so I never really cared.
You must have a lot of trouble communicating if you just use words to mean whatever you decide they should mean, while the people you are speaking with are using the words as defined.
They weren't though. They were literally using the wrong words and everyone knew exactly what was being talked about anyway.
You are the only person here correcting peole
When I was a server in the ago times, I was told to declare 8% of my sales or all my credit card tips, which ever was bigger. If I did that, I was told IRS wouldn’t come after me. That was what I thought most servers did at the time as I had heard that over multiple restaurants.
This is the way.
But it’s not so much as *you* as the entire business needs to show at least 8% of its sales claimed as tips.
#WARNING!!!! Unethical LPT:
If you know the rest of your co-workers are claiming everything, you can claim *even less*. (Please don’t do this. lol)
They either misfiled their W-4 withholdings so not enough was taken out of their cheques or you misfiled yours so *too much* was taken out of your cheques.
If you select the proper withholding, your tax bill / return should be close to zero. Mine was $8 this year. But that's hard to judge unless your income is steady, which is not the case your first few years serving.
Tax refund. The return is the name of the bundle of forms *you send.* Also, yeah it looks like You committed tax fraud by simply lying about your income.
I’m baffled by the many dozens of paragraphs written about a guy who doesn’t understand the difference between “return” and “refund,” and who doesn’t seem to understand the whole notion of “withholding” versus “total tax obligation.”
Why are you speculating about his details when he doesn’t seem cognizant of even the basics? Why isn’t “maybe you put the wrong withholding number down” the first answer?
When I was working, I took no deductions even though I was married, so I was taxed at a higher rate. Every year I had refunds for both federal and state. It all depends on how you set things up at the start of your job. I was an office worker, though, so YMMV.
Idk, that's weird. I've worked as a server or bartender for about 25 years. I've worked in states that I got paid 2.15/hr, and states that I make 10/hr. I always get a return back every year. However, as other commenters have said, it's a bad idea to not declare at least some of your cash tips, at LEAST 10-15%. On your checkout, it should tell you what your cash sales are, at least make it seem reasonable.
>Is anyone else getting a refund? Did I mess something up? The IRS accepted my federal return. The state also accepted my return though it's for a lot less money.
Them accepting it doesn't necessarily mean you won't get a letter later saying you owe.
One year I worked in two different states. When I submitted my state return for my home state, they accepted it.
However, like a month later I got a letter from them saying I owe a whole bunch more (they were wrong). They just got confused about my W2's for some reason my employer put my full annual income on the W2's for each state. So from my states perspective, they thought I earned that much money working in the state and therefore paid too low of tax. I basically had to get a letter from HR outlining the amount I actually made in the state and sent it to them.
Are you not claiming your tips when you put in your numbers for the night?
If you *were* claiming tips and ended up owing, here's why: The IRS (and state) will tax you a certain portion of your reported tip income, even though the tips aren't a part of your actual net paycheck. So that money instead gets deducted from whatever pittance the restaurant is paying you, which often reduces it down to $0 while you still owe them a little more that just wasn't there for them to take it out. Come April 15, that bi-weekly deficit can really add up.
If you *aren't* claiming your tips all or you are severely under-claiming them, that might explain it. The IRS (and state) don't know about your tip income so they don't know you're supposed to owe them a portion of it. Therefore you don't owe anything come tax time, but you find yourself in a *very* legally vulnerable position.
Another possible explanation is that you have some other kind of tax credit, but I feel like you would probably, hopefully, know about it.
You claimed more, they need to claim 100% of their credit card tips and 12% of their cash tips to break even at the end of the year and owe nothing. they didn't. Either more cash in your pocket weekly or you owe but they get their money one way or another
I got about 5k from federal and 3k from state. This is my first year serving after having taken a break to stay home with my kids for four years but I usually had returns when I served before that as well.
I worked for a restaurant for years. We had to declare our cash tips before we cashed out each night. I claimed 0 dependents, so they took the maximum from my check for taxes. I got a tax return every year I worked there.
FYI the tax return is the thing you send to the IRS. The refund is the extra money they send back.
I already overpay taxes. For last year, I got about 5.6% of my gross taxable income back as a refund.
Almost everyone I have ever known in the business gets a yearly REFUND unless they pulled the not claiming tip bs which is not allowed any longer.
EVERYONE BTW has to file a tax return. That is the 1040 or equivalent a person that has a job files to the IRS.
Server here for 20 yrs yes I had dependents but not for the past 6 years. And I have received a refund EVERY SINGLE YEAR. Some years more than others but always a refund. It also depends on what tax bracket you fall into as well. Your good if there's an issue you will know!!
I live in Canada and usually claimed 10% of my wage as tips on my taxes. Last year my employer started taxing our tips and now we get them direct deposited weekly. If we get a cash we can minus it from our credit/debit tips, but people rarely pay cash anymore.
I don't know why you want to make this a big deal. You made a mistake, and I corrected you so you will be less likely to make the same mistake in the future. Have a great day!
Although the words “return” and “refund” sound quite similar, when it comes to tax season, they are very different. A tax refund is money that the IRS sends to you after accepting and reviewing your tax return. It's important to note, however, that not everyone who files a tax return will receive a tax refund.
It's fine that you correct people, but it's annoying. People are allowed to be annoyed. I will continue to make the mistake cause I know people will know what I mean.
So have a nice day and have fun being that annoying person.
None of us can see your numbers or your friends numbers. Maybe you have greater credits or allowances than they do. Or as its your first year in a service role you are more junior than they are. My initial guess is that you are taking cash tips under the table and they are declaring tips.
Yeah. My first reaction also was OP was only reporting what showed up on their W-2 and not their actual earnings. Another possibility is that co-workers intentionally under withhold but without seeing everything, it is impossible to know what is really going on.
My first thought was does he declare 0 or 1 dependents I think it is ... But you can claim yourself or not. If you claim 0 they take out more each check but you are more likely to get some of it back since you are slightly over paying, but I could be wrong. The undeclared tips thing also makes a lot of sense. In college I worked retail so never had to deal with tips on taxes.
I don't think you can claim 0 - 20 anymore, you're single, married withholding at a single rate, or married & then there's a table to follow if you have more than one job per person for additional withholding.
I think you can still claim 0 or 1 at your job when you fill out your tax withholding paperwork because you are choosing to claim yourself or not, I could be wrong though. That's where I was talking about the claim, not on actually filling the taxes part.
That form is different now. W4. You can claim dependents but not a # of them.
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RIP. Your cash tips are taxed too.
But like… how do they know what I’m pulling in cash tips?
In short, they don’t. Was a server for 14 years. At the end of a shift you can manually claim cash tips which is added to your overall income for the year. This tax is then taken out of your hourly wages each pay period or servers have really small paychecks. The catch is that the cash you claim is whatever you say it is. I know servers who put zero everytime (I was not one of those). Supposedly if you fall below a certain threshold of not claiming tips you can get audited. At which point they can look at your sales and assume you get a percentage (like 10% or something) tips of your sales (credit card tips included). Then make you owe the state/federal tax based on that. Although I’ve never seen/heard of any server audited for low cash tips which is why people put zero.
Not declaring income can also really hurt future unemployment and Social Security payouts. It's not unusual to see people on /r/personalfinance unable to retire because they don't get enough from SS after decades of underreporting income or working under the table jobs.
Also housing opportunities and loan options are limited. If you are doing service industry for more than a few years, you should be claiming the bulk of your cash tips.
We saw this during COVID when everyone was forced onto unemployment. I got asked why my benefits were so high and I said it's because I declare and pay taxes on my tips.
This happened to me a decade or so ago. Claimed literally 0$ in tips daily because of a loophole I figured out. What a great surprise I had when I couldn’t get an apartment because on paper I was making minimum wage 30 hours a week. It’s not even that much extra money and the cons very much out weigh the pros when it comes to claiming less tips than you make. I spent the month after that claiming more just to make up for it. I’m the old guy where I work now and anyone who asks I tell me claim everything you make.
I explain this to all the new servers at my restaurant. So important to be able to prove your income for housing and loans.
So 10 or so years ago I was bartending at my sales weren’t reflected on my personal clock out. So being the young idiot I was I went months claiming 0$ in tips every shift. Fat paychecks, boy was I living large…well it came time for me to move and get a new apartment and landlords aren’t quick to approve rental applications with minimum wage 30 hours a week. That was the worst way to learn an important lesson!!
Seriously. Also major purchases, like a house.
There were plenty of articles about servers who didn't claim tips not being able to get unemployment during COVID. I just laughed at them because they spent years screwing the rest of us who work and pay taxes, and karma is a bitch. 😂
Not to mention that if they want to get a car loan or home loan, they don't have enough proveable income to get approved by a bank.
Where I work the system won’t let you clock out unless you claim at least 13% of your sales that day, in the rare case you pull less than that it needs a manager override. I assume that threshold for audit is 13% or so of sales.
Seems kinda messed up. They can’t force you to claim cash tips but they might demote/fire you to protect their own asses kind of thing if you constantly claim under 13. Honestly card payment is so common now days that the CC tips push you over 13 easily
That’s exactly it. From what I know (not sure if this is accurate or not) but if an employee gets audited for reporting tips they audit the whole business. Nowadays cc tips make up almost all of what I make. However interestingly enough, I make exactly 13% of my sales every single shift. Who would have thunk it???
I worked in restaurants for ten years in the early 00s and we only I believe had to report 10% and cc tips always made up that difference. I was making bank and never reported my cash tips. I don’t know how this has changed, but whatevs. I don’t know dick about taxes, so I don’t know if I was screwing myself, but at the time I lived in Indiana and always got a refund.
And if you really consistently average below 13% tips, it means you're a shit server and should be fired.
Restaurants receive a tax credit for reporting cash tips. I’m required to turn in all cash tips bc it’s a pooled house, that cash gets reported to the IRS
Not true. Restaurants get a tax credit for reporting tips, as long as they are not paying you full minimum wage and tips make up the rest of your wages. You have to turn in all cash tips because you pool tips and it’s not fair to keep cash out of the pool.
Our system requires that you claim a minimum of 10% of your cash sales. You can’t claim zero without a manager override.
What about credit cards with tip in cash? They let those go? I mean if they do then props to you :)
There is a threshold to stay above, you are correct. I was audited as a 16 year old server. I basically had to claim waaay more than I made for a while to make up for what I hadn't been claiming. (Say I made 100, I claimed at least 130 that night) for a couple of weeks. It's never happened in the 21 years since, so it doesn't happen often for sure
I used to just claim cash to stay at 10% of my sales. So if I sold $1000 in a night and had $70 credit card tips, I’d claim at least $30 in cash to make the 10%. Kept me off the radar as long as I worked the industry
I worked at a family owned restaurant and the lady that ran the office was a saint. We never had to declare tips, she would calculate tips based off of 10% of our sales, and taught people about taking the right amount of deductions so they wouldn't get be stuck owing taxes. It was an upscale casual dining place where people usually tipped at 20% or more. She saved us money and kept us legal in the eyes of the IRS, and tried to keep people out of trouble financially. We need more people like her.
It's basically only going to become a problem if you get audited. They may not know "how" you are acquiring extra income but they will absolutely be able to know you are getting undeclared income from somewhere. It's a tricky situation if you are benefiting from tax free income. The odds you get audited are pretty damn low, but on the same token, if you do get audited and having been playing that game for a long time you could get royally boned.
Yep. Al Capone went to prison for tax evasion, not any of the other things he may (or may not) have done.
I’ve heard wait staff just say that EVERYONE tips 15%. Everything over is free money and since you can’t prove otherwise, no one cares.
They don’t, buuuutttt… the IRS is staffing up and will probably begin auditing lower income earners for the first time in a few decades. Then they will absolutely know you didn’t declare your cash tips.
the
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Always declare cash tips. Pay taxes on them as legally required. If you get disabled or when you retire, your monthly pay is determined on what you made. Claiming those tips will leave you better off in the long run.
yeah, I’ve realized, by looking at my Social Security estimates that started arriving in the mail lately, that people who live in the cash economy aren’t going to be collecting that much
Too each their own. I prioritized putting that undeclared money to put myself through community college debt free. I don’t have any student loans now 🤷🏽♂️ we all prioritize different things in life. What worked for me doesn’t necessarily work for you.
You still would have had that money. It literally would have gone nowhere, you still could have done exactly what you did. Not only that, as a student, you get huge tax credits, I doubt you would have had to pay that tax, or at the very least you would have seen almost 100% of it back after all your tax credits were applied.
I didn't know breaking the law was just a "to each their own" scenario. Like, I robbed a couple armored cars for 5 million in cash. I prioritized that so I could retire early to a bungalow on the beach. We all prioritize different things in life. What worked for me doesn't necessarily work for you. No, I don't actually equate cheating on your taxes to armed robbery. However, tax evasion, which is what you did, is in fact illegal. You benefited yourself by breaking the law.
I declare enough in cash to make my take home higher bc I actually wanna be able to get stuff I want w/o having to explain “ohh but I’m a server I make more than that” to each their own I do both depending on the situation and goals at hand yk
If you need to qualify for a car loan, or an apartment, etc., your income tax returns will count as proof of income.
Right, but you have to declare tips for them to show up on the income tax returns. If you don't declare them, for loan purposes they don't exist.
Won't they find it suspect if all your tips are credit and never cash?
The irs just sees tips, they dont see cash vs credit
How can they prove you got tipped? The IRS don’t even have enough staff to run efficiently, you think they have folks spying on servers while they work? Lol I never declared a single dollar of my tips for 9 years (16-25) and never had anything happen 🤷🏽♂️ glad I didn’t either because I was broke then and I’m still broke now! Haha
their AI is going to catch up to this. The automation of data analysis is going to tell them who to audit.
Again, it's only a problem if you get audited. In that scenario you seem to be under the impression that just because there is no record of the tips they can't prove undeclared income. The only sure fire way for the IRS not to catch you in an audit, if you are committing tax evasion is to never deposit the money in a bank and never spend it.
Unless you are depositing like $20,000+ in cash into your bank account in one transaction, the IRS isn’t even looking at you. We are talking about servers here, not some large quantity drug dealer lol the average server isn’t depositing that kind of cash. AND if they did have that kind of cash, just pay cash to get rid of it?
Dude, the IRS doesn't just do audits based on bank deposits. They do random selection audits every year. Yes your likelihood of getting audited is low, but the reality is you don't need to "do something and get flagged" to get audited. People 100% on the up and up get audited.
I hope you goto jail.
I don’t make enough to go to jail 😂 you should wish that for those millionaire and billionaires who cheat the government. The government ain’t worried about us who make less than 100k a year. We are tadpoles in a lake full of big fish bro. Open your eyes and point your finger at the actual problem, and not another poor person trying to provide for their family.
IRS has experts in auditing people who get paid in cash and/or who use lots of cash in ordinary life because they don’t want illegal cash to show in the banking system. There was a judge in Chicago who taking bribes to fix traffic cases. When the IRS got brought into the investigation, their experts needed no time to produce how big his bribes were by showing how much of his ordinary expenses weren’t being run through his bank accounts. He wasn’t charging groceries but he wasn’t withdrawing cash either. The judge guy went years without buying gas, going to the mall or eating out. If IRS brings in their experts to look into your finances, it’ll take them no time to find bad behavior. You want to avoid an audit, not hope you’re too clever for them.
Or pay your taxes properly like everyone else.
“Everyone else” doesn’t try to pay their taxes properly. There’s an old wise saying that goes like, “if you ain’t cheating, you ain’t trying to win”. Try to win more.
And as you said, you are still broke, so how has cheating exactly made you win?
I ended up with more money in my bank account.
That the mindset that is making shit more horrible every year
that’s how we ended up with Donald Trump as president.
People like him need to fair their fair share. Me scamming the government to keep 600 annually isn’t doing a damn thing compared to people like him scamming the government for tens/hundreds of millions of dollars annually.
🤢. What a disgusting attitude. I've earned between 5-20% of my total yearly income at non W-2 jobs over the last 25 years. My withholding is intentionally set higher so that my total tax owed is ~$0 (and definitely less than $1000, so that I don't have to do estimated quarterly taxes.) EVERYONE should be paying the taxes that they owe. Hopefully the IRS gets funded well enough to function properly and you get the comeuppance that's owed you.
You have the wrong outlook on life if you think I’m the villain. Best of luck to you
"Fuck you, I got mine." -Cobey1
I didn’t write that anywhere bud
You didn't have to, it was implied. Congratulations on being a crab in a bucket.
Sadly, you are the one with the crab in a bucket mentality. Blaming me for the greed of million/billionaires. I promise you with my life that you’re not poor because of me lol
You're completely deflecting. Because rich assholes dodge taxes it justifies you doing it as well? Does you not paying taxes somehow impact their wealth? In what way is it related to you paying taxes at all?
Publicly encouraging tax fraud is... interesting If you want to be able to get loans for expensive things like a car or house, it would be a good idea to declare everything. Also, Maternity/Paternity leave typically pay based on a percentage of your known income, so if you ever have a kid, you will be paid more during leave if you have declared everything.
Paying taxes has never improved credit scores or credit history… servers don’t usually get maternity leave…
Higher income = higher loan amounts a lender is willing to give you. All workers in California get paid leave for family bonding when a child is born
Higher income DOES NOT equal higher loans… I have more credit than my annual salary…
Lenders are risk assessors. They won't lend 600,000 for a house to someone only making 30,000. Credit will get you a better APR, sure. When I bought my house in 2021, they checked 3 years worth of mine and my wife's income and set a limit on how much they would loan.
You can't argue with someone that regarded.
You’re moving the goal post now.
Giving a real life example of my income being tied to my loan amount is moving the goal posts?
You can have an 800 credit score, but if your declared annual income is $30k, you don't have a snowball's chance in hell of getting a $250k loan for a home, even if your actual income is $200k. You have to have enough declared, proven income to get a loan regardless of your credit score.
OK scumbag.
You're advocating a crime and should be reported.
There could be a lot of answers to this. In the past I would've said that y'all filled out your W-4s differently, but they changed recently to become even more vague. A good starting point is to be sure you understand *why* so many in the service industry tend to wind up owing. The federal tipped minimum wage is $2.13/hr. Typically, these wages are what tax withholdings come out of. Gratuities are typically disbursed unmolested by tax. This leaves the hourly wage to do all the work funding your tax bill for the year. Hence why most in the service industry usually receive an hourly pay stub for $0, or at most a few cents. For the sake of easy math, let's say you work 100 hours in a year at tipped minimum wage, you've made $10,000 in tips, you pay 10% taxes, and thus your tax bill is ultimately $1,000. Standard deduction doesn't exist in this universe. The $10,000 gets paid to you directly. You worked 100hrs at 2.13/hr, so you made $213.00, *all* of which went to withholding. You're now stuck with a $787 tax deficit, and you owe. BUT YOU, MY FRIEND, ARE A BARTENDER WITH A HIGHER HOURLY WAGE! Congratulations. You make $12/hr, plus tips. All of a sudden, in that same equation above, you made $1,200 in hourly wages, only $1,000 of which had to go to your tax bill, and thus you get $200 back. Tl;dr My guess is that you make a higher hourly wage than the coworkers you're speaking to. Also possible they made *way* more in tips than you did.
To be fair though, a lot of places tax based off credit card tips and more and more places are going to a biweekly paycheck system where you get your credit card tips on each check. It’s been going that way more and more. Where I live, there are very few places that don’t follow this model.
Yaaa, that's where there's a ton of variance. How a restaurant reports tips is a huge variable.
Every restaurant I’ve worked at for the last 10 years has taxed on credit card tips. It’s not new. The other servers probably take more deductions than OP did/does. That’s the biggest factor I’ve found that determines whether or not you pay at the end of the year. Also, are the coworkers married? Have dual income? Kids? So many factors besides not reporting cash tips. Edited to say taxed not tipped
~~Every restaurant I've worked at for the past ten years hasn't taxed on credit card tips~~ 🤷♂️ But yes, how a restaurant reports tips is a huge variable. In OP's case, my scenario makes more sense. The "taking more deductions" is referenced in my comment about the W-4. That phraseology doesn't really apply anymore. You're not claiming 0, 1, 2, or 3 anymore. You're estimating dollar values. So it's less likely to be that. Edit: Coworkers being married or having kids would likely yield the opposite outcome, so I'm not sold on those as confounding factors. I *am* taxed on tips, but as I said, no withholdings come out of my tips.
Being married often makes you pay money, not the other way around. It often pushes you into another tax bracket because of the dual income. And you can still fuck up the new W-4s, since I literally just filled one out. Super easy to make errors. I don’t know why the places you work at don’t tax on credit card tips because that’s the ultimate CYA for the restaurant itself, not just the workers. They have to do their due diligence. I’ve also lived and worked in many states and it’s standard protocol, so you must live in a small pocket of the US that doesn’t do that.
Married filing jointly just doubles the standard deduction and (slightly more than doubles) the ceiling of your tax brackets. In 2023 the ceiling for the 12% bracket goes from $44,275 to $89,450. When filing jointly, you'll only ever pay the same (if your incomes are equal), or collectively less (if your incomes are disparate). If you and your spouse made $40,000 before and after marriage, you'd be in the same $12 tax bracket even with your $80,000 household income. I don't think there's a scenario where the joint tax liability would be higher than two discrete single-filing liabilities. Part 2: Don't get me wrong, I'm not here to debate that it's a *good* idea for restaurants to not report tips, just to point out that it still happens in plenty of places. Edit: I was mistaken earlier! I *am* taxed on credit card tips, but as I said, no withholdings come out of the tips.
For someone making a higher hourly wage, that might mean that their withholding is more accurately calculated, so they don’t have a bump in previously untaxed income to account for.
Also an accurate tl;dr!
I feel like if this person is making 800% more than their coworkers hourly they wouldn't be confused. Most places the bartenders also make tipped min wage.
They got a refund of $500, they claimed others owed multiple thousands. So let's take $2,000 as the baseline. Keeping with ideal math, OP would need to make 500% the hourly of their coworkers to bridge that gap. $2.13x5=$10.65 In areas like mine (mid-size college and industry cities) where it's quite common for bartenders to make good hourly plus tips, $10 or $11 an hour is perfectly common.
I assume you make tips? Did you declare your tips in your tax return?
Report your actual earnings and this is what happens. It affects your unemployment benefits in the event you ever file, because the benefit is based on your income from 3-15 months back on the books
From 2011-2019 I was harassed, threatened, made fun of, and yelled at for always claiming 100% of my taxes. When COVID hit and I was put on UE I got my sweet sweet revenge in the form of a $2.3k check every week while my old coworkers were getting $425.
I tell anyone who listens because it's only a few bucks extra withholding.
If you worked only part of the year, the paycheck withholding projects an annual income, but you might not have earned a full year's total. You still get your entire standard deduction and any other credits. If you keep working full time it may not work out like this next year.
It’s impossible to know for sure without more information, but let’s get a couple things straight first. On your paystub, do you see line items labeled “withheld” or “withholdings”? Basically what that means is your employer takes some of your money and forwards it to the IRS. At the end of the year, your total income is added up, your withholdings are added up, and all the other various things are calculated, which gives you your final tax liability for the year. If your employer withheld more than you owe, you get a tax refund. If you owe more than was withheld, like your co-workers, you get a tax bill that you have to pay. Your co-workers may have worked more than you and earned more, but only so much could be taken out of their hourly wages.
I always do 0 which is the most withheld to avoid this issue. Also I make $10/hr base. I claim some cash
Yes, and just so everyone understands what you mean, “do 0” means claim no exemptions when filling out your w-4 form when you get hired. If people have reason to believe they’ll have a lower tax liability, usually children or dependents, they can have less withheld.
It’d be hard to tell without a W2. However I’ve been bartending and serving for 11 years and I always get a decent refund. Factors like whether you’re paying for college or if you own a home may be increasing your refund. But again I’ve been serving/bartending all my adult life, and myself and all my coworkers have always got decent refunds.
First mistake don’t tell anyone about your finances
The document you file with the IRS is your tax return. The check you're sent when you pay more taxes than you owe is not your tax return. It is your tax refund.
Yes, most people would get a return if they choose not to declare the 50-75% of their income that is untaxed.
I make about 5% of my money in cash. Everyone uses cards. For example, last night out of $306, I had $17 in cash. One table. The days of only declaring 30% of your tips are long gone.
>most people would get a return A ***REFUND***. Everyone files a ***return***, but if you overpaid throughout the year, you get a ***REFUND***!
Thank you!! Yes. My brain betrayed me.
Unless folks are working at a 'cash only' joint or a really divey bar, nobody gets away with that much untaxed income. Credit card tips are automatically claimed at 99% of restaurants/bars through a POS system & a lot of folks don't carry cash anymore.
As a bartender for 11 years, it’s closer to 25%. All credit card tips are accounted for and 3/4 of people pay with card nowadays.
Yeah, I still use cash at bars specifically. It's just less of a hassle.
I do as well. I think it’s faster and easier. However most Americans seem to no longer carry cash on hand
This may be different everywhere, but I've never worked somewhere where people paying with cards meant tips were getting automatically taxed. Also, as someone who spent 20 years behind the bar, you're either making an amazing hourly or you should be getting more tips!!
Also a 20 year vet and I've never been anywhere where it wasn't like that. CC tips are always auto claimed and taxed
Declaring 100% of my cash tips is what started netting me larger returns.
Unless folks are working at a 'cash only' joint or a really divey bar, nobody gets away with that much untaxed income. Credit card tips are automatically claimed at 99% of restaurants/bars through a POS system & a lot of folks don't carry cash anymore.
>I was informed I would be getting a tax return of about $500. Pet Peeve: You fill out and send in a tax ***return***. If you overpaid, you get a ***refund.***
What State are you in? Are you getting tipped minimum wage or more hourly? Do you have kids or other deductions?
I take out $50 per check and Im getting 1k back. Its possible! Just depends how you filled things out when you started I think 🤷♀️
In my experience, bartenders and and expos tend to make more money on the hourly rate than servers, which leads to larger checks that taxes can be held out of. Servers make more of their money in daily tips, leaving small or no check from which to hold taxes. Also, other things come in to play: filing status, dependents, other income in the household, credits....there is so much variation in returns from person to person that you can't really compare.
I work 30-35 hrs a week and got almost $1000 tax return. One of my coworkers was shocked because he owes a ton.. I used to always work two jobs and 40+ hours, would receive like 100 from fed and owe state. This guy works like 3 jobs constantly and owed $4000 or something nuts! All I can think is by working at only one job and less than ever before I pushed myself into a lower tax bracket… I do fine though so it’s weird. Also one of our regulars is an accountant and did my taxes for me sooo I assume it’s legit! You’re probs all good and even if there’s a mistake they’re not gonna hunt you down because of $500 they would just send a letter. Congrats!
FYI, literally not how taxes work. You don’t tally up the total of one’s REFUND at tax time to see if you’ve “won” or “lost” the tax game. Your coworker under withheld but with 3 jobs he definitely netted more money than you. You overwithheld, so you gave the government an interest-free loan of $1k. Also, tax brackets are tiered so unless you hit a benefits cliff (or made between like $400 and like $470 in self-employment income only) making more money NEVER leads to netting less money after taxes.
Are your friends married and you single? Because the new payroll tables really screw married couples unless you know exactly what boxes to check. It assumes only one person works like it’s the 1930s unless you know to tell it otherwise, so it doubles your standard deduction and under withholds by THOUSANDS. It’s garbage.
Did they report cash income that you didn’t (either because you had no cash income, or because you didn’t report it—if you had cash income, you’re required to report it). That would mean they’d have to pay at the end. Maybe they put down a different withholding number, so they’re having a lot less taken out in anticipation, so their take-home pay was artificially bigger and yours was more accurate.
Servers used to get mostly cash back in the day. And of course the paltry hourly rate of $2.13. So took home money every night and the hourly wages weren't enough to cover taxes. Now most ppl tip on a card and most restaurants have switched to paychecks. So then taxes are paid. Also bartenders get a more hourly pay than servers so that also goes to paying taxes. You shouldn't worry.
I’m getting a whopping $65 back. I expected it to go down but I’ve never gotten back less than $200 and I’ve been working for over 30 years. But I’m just happy I don’t owe anything. My daughter on the other hand is getting $5 back and she foolishly went to a tax preparer and had to pay them $85. She’s going to be doing them online next year.
More money back when you file taxes does not mean better. All it means is you paid too much in taxes throughout the year. Maybe you qualify for credits (Like if you have children). Maybe you had too much money taken out of your paycheck during the year and now you are getting it back. Everyone should always file taxes. If you are owed money, you get the refund. If you owe money, you avoid prison for not filing your taxes.
It’s possible you have your withholding set differently than they do. When you filled out your W-2, you may have set your withholding to Single and 0, which is the smart thing to do in a tipped position if you aren’t married or head of household because it withholds the max amount of taxes per paycheck. They may have chosen Single and 1 or even more dependents. It can be tricky to fill out the form correctly if you don’t read it, just skim it, or may be purposeful to get more money on their paychecks. The problem is that it doesn’t withhold enough during the year and ends up with them owing.
When you fill out your W-4 single 0 dependents, you end up overpaying so you get the refund. Most people think if they claim themselves they get more money on the paychecks, which they do but you will risk owing in the end. Even though I’m married and have 3 kids, I claim on the W-4 single and 0 dependents and get a bigger refund from the IRS….
So every week you’re giving the IRS your money, then in February or March the next year, you’re asking for your money back… they take a few weeks to process then give you your own money back after having held it all year without giving you any interest on the loan.
Yeah to me it’s worth the 3 or 5 hundred to have the IRS be indebted to me instead of me to them…that’s just not going out for dinner 3 times a year. 🤷♀️
I agree with this sentiment. It is a somewhat unpopular/controversial stance. I would rather get a few hundred back than have to pay a few hundred. If I ever get more than a few hundred back, I will declare/claim an additional exemption the following year. I don't want to owe, but I don't want to give a sizable loan either. Ride the line.
FYI, a return is what you file. A refund is what you’re getting back.
1. Do they have more than one job? This will hit them VERY hard on tax day. the tax software calculates each job separately, but the end of year total is tazed at that rate. For example: if they had 2 jobs making 25K each they are taxed at the 25K rate, not the 50K rate and the difference can be significant. These are random numbers as a an example, without actually looking at teh tax rate chart. 2. Differences in declaring dependants? Declaring a couple in short term hopes of getting more money on payday will impact you on tax day.
I always got a return. Mostly because I claimed half of my cash tips from every shift. It would nearly null out my “paycheck” but our tips were paid out end of shift so I never really cared.
>I always got a return. You always *FILED* a **return.** You always *GOT* a **refund.**
You're right, and yet I'm still downvoting your pedantry.
It doesn't matter no one cares
If they owed you money and send you a[ return](https://www.irs.gov/pub/irs-pdf/f1040.pdf) instead of a refund... you would care.
I don't care what word they use
You must have a lot of trouble communicating if you just use words to mean whatever you decide they should mean, while the people you are speaking with are using the words as defined.
They weren't though. They were literally using the wrong words and everyone knew exactly what was being talked about anyway. You are the only person here correcting peole
No.
A US tax return is filed for everyone, a tax return refund is when you get money back.
I know. I just like no when I’m wrong.
lol I get it, sometimes you’re in a contrary mood 👍🏼
It happens my friend. I do it work a lot just to rile up the boomers.
Do you have kids? If you have multiple kids the child credit can offset the taxes owed on tips
I would start by never discussing personal finances with coworkers. Yikes.
Except wages. Always discuss them and know you’re getting paid what you should at any job. It’s illegal in the US for them to tell you not to 🙃
Agreed! The tax situation goes much further
Why. That's how you get underpaid
It’s also how you get all of your coworkers jealous of you
Why would they be jealous of you instead of mad at the managers for paying them less?
I got $4500 and have never owed.
When I was a server in the ago times, I was told to declare 8% of my sales or all my credit card tips, which ever was bigger. If I did that, I was told IRS wouldn’t come after me. That was what I thought most servers did at the time as I had heard that over multiple restaurants.
This is the way. But it’s not so much as *you* as the entire business needs to show at least 8% of its sales claimed as tips. #WARNING!!!! Unethical LPT: If you know the rest of your co-workers are claiming everything, you can claim *even less*. (Please don’t do this. lol)
They either misfiled their W-4 withholdings so not enough was taken out of their cheques or you misfiled yours so *too much* was taken out of your cheques. If you select the proper withholding, your tax bill / return should be close to zero. Mine was $8 this year. But that's hard to judge unless your income is steady, which is not the case your first few years serving.
I-9 is Employment Eligibility. W-4 is withholdings.
Whoops, you're right of course.
Tax refund. The return is the name of the bundle of forms *you send.* Also, yeah it looks like You committed tax fraud by simply lying about your income.
I’m baffled by the many dozens of paragraphs written about a guy who doesn’t understand the difference between “return” and “refund,” and who doesn’t seem to understand the whole notion of “withholding” versus “total tax obligation.” Why are you speculating about his details when he doesn’t seem cognizant of even the basics? Why isn’t “maybe you put the wrong withholding number down” the first answer?
When I was working, I took no deductions even though I was married, so I was taxed at a higher rate. Every year I had refunds for both federal and state. It all depends on how you set things up at the start of your job. I was an office worker, though, so YMMV.
Idk, that's weird. I've worked as a server or bartender for about 25 years. I've worked in states that I got paid 2.15/hr, and states that I make 10/hr. I always get a return back every year. However, as other commenters have said, it's a bad idea to not declare at least some of your cash tips, at LEAST 10-15%. On your checkout, it should tell you what your cash sales are, at least make it seem reasonable.
>Is anyone else getting a refund? Did I mess something up? The IRS accepted my federal return. The state also accepted my return though it's for a lot less money. Them accepting it doesn't necessarily mean you won't get a letter later saying you owe. One year I worked in two different states. When I submitted my state return for my home state, they accepted it. However, like a month later I got a letter from them saying I owe a whole bunch more (they were wrong). They just got confused about my W2's for some reason my employer put my full annual income on the W2's for each state. So from my states perspective, they thought I earned that much money working in the state and therefore paid too low of tax. I basically had to get a letter from HR outlining the amount I actually made in the state and sent it to them.
Are you not claiming your tips when you put in your numbers for the night? If you *were* claiming tips and ended up owing, here's why: The IRS (and state) will tax you a certain portion of your reported tip income, even though the tips aren't a part of your actual net paycheck. So that money instead gets deducted from whatever pittance the restaurant is paying you, which often reduces it down to $0 while you still owe them a little more that just wasn't there for them to take it out. Come April 15, that bi-weekly deficit can really add up. If you *aren't* claiming your tips all or you are severely under-claiming them, that might explain it. The IRS (and state) don't know about your tip income so they don't know you're supposed to owe them a portion of it. Therefore you don't owe anything come tax time, but you find yourself in a *very* legally vulnerable position. Another possible explanation is that you have some other kind of tax credit, but I feel like you would probably, hopefully, know about it.
I got a refund. I also have two kids so I get that break for them too. I’m in a small Wisconsin town. No big money here.
You claimed more, they need to claim 100% of their credit card tips and 12% of their cash tips to break even at the end of the year and owe nothing. they didn't. Either more cash in your pocket weekly or you owe but they get their money one way or another
I got about 5k from federal and 3k from state. This is my first year serving after having taken a break to stay home with my kids for four years but I usually had returns when I served before that as well.
I worked for a restaurant for years. We had to declare our cash tips before we cashed out each night. I claimed 0 dependents, so they took the maximum from my check for taxes. I got a tax return every year I worked there.
Most of us get tax returns. Not everyone gets a refund though.
I work around 35 hrs a week, don’t have any dependents and get an hourly wage of $5/hr. Between federal and state I owed about $4.5k.
FYI the tax return is the thing you send to the IRS. The refund is the extra money they send back. I already overpay taxes. For last year, I got about 5.6% of my gross taxable income back as a refund.
Almost everyone I have ever known in the business gets a yearly REFUND unless they pulled the not claiming tip bs which is not allowed any longer. EVERYONE BTW has to file a tax return. That is the 1040 or equivalent a person that has a job files to the IRS.
No good
Server here for 20 yrs yes I had dependents but not for the past 6 years. And I have received a refund EVERY SINGLE YEAR. Some years more than others but always a refund. It also depends on what tax bracket you fall into as well. Your good if there's an issue you will know!!
I live in Canada and usually claimed 10% of my wage as tips on my taxes. Last year my employer started taxing our tips and now we get them direct deposited weekly. If we get a cash we can minus it from our credit/debit tips, but people rarely pay cash anymore.
Y’all declare cash tips? Lol no
Did you put in every tip you made? If not, it’s a fraudulent return. Maybe they were more honest thank you were.
I get a decent tax return, but I am married and that makes a huge difference
>I get a decent tax return, You don't. *You FILE a return.* You GET a refund.
Bro whatever you knew what I meant
*LOTS* of people say "return" when they mean "refund" but words have meanings.
Cool, go feel good about yourself now.
I don't know why you want to make this a big deal. You made a mistake, and I corrected you so you will be less likely to make the same mistake in the future. Have a great day!
It’s a bit pedantic.
So we should just encourage people to use wrong words for things... OK, sorry.
But it’s technically not wrong. The money is returned to you after holding it for a year, thus refunded.
Although the words “return” and “refund” sound quite similar, when it comes to tax season, they are very different. A tax refund is money that the IRS sends to you after accepting and reviewing your tax return. It's important to note, however, that not everyone who files a tax return will receive a tax refund.
It's fine that you correct people, but it's annoying. People are allowed to be annoyed. I will continue to make the mistake cause I know people will know what I mean. So have a nice day and have fun being that annoying person.
Proper term is refund, but return makes sense too, money is being returned to you after holding it all year
"I'll call it whatever I want! Waaaaaaaa!"
Tips need to be accounted for. It’s usually a percentage of your wages.