Waitress tax question

May 14, 2009 7:51 PM

If you are a waitress, can you deduct from your taxes the amount that your restaurant requires you to tip-out to your bussers? (In my case, this generally amounts to $8-$15 for every shift I work.)

Also, the restaurant that I work for requires me to claim my tips at the end of every shift. Since most of my tips are from credit card transactions, the computer tells me that amount each evening and I claim a couple dollars over that.

I know a lot of my co-workers claim way less than what they make, but is that safe to do if the restaurant has a way of tracking the vast majority of what you made?

Also, if the answer to my first question is that I cannot deduct tip-outs from my taxes, would it be OK to just subtract that amount from my credit card transaction tips at the end of each shift?

Thank you for your help.

posted by melangell to Work & Money (9 answers total)

I don't know what I'm talking about, but it seems to me that whatever you're tipping out, if you're required to do so, isn't actually income. So it doesn't seem like you should be paying taxes on it.
posted by madcaptenor at 8:01 PM on May 14, 2009 [1 favorite]

I'm not familiar with the actual regulations involved but it seems to me like the basic principle would be that if it's someone else's income rather than your income, you do not have to pay income taxes on it.
posted by XMLicious at 8:02 PM on May 14, 2009

Right, you have to report your earnings, and your tip-outs are not earnings.

But, then places here report your tips for you, usually based on a 10% "estimate." We didn't have to report our tips separately. Although it now occurs to me we maybe technically were supposed to.
posted by cmoj at 8:03 PM on May 14, 2009

Based on my waiter friend's W-2, his credit card tips are reported for him at the end of the year. So, if you plan to claim less than what is on your W-2, you will need some sort of documentation. (Actually, I have no idea if that's allowed, even.) My friend just reports the credit card tip amount that ends up on his W-2 because he gets so little in additional cash tips that he has figured out they're a wash, after tipping out busboys.

So, no, you shouldn't have to report your tip-outs as earnings, since they are not actually earnings, but you may need to ask your employer how they report tips on your W-2. Do they deduct the tip-out percentage from the credit card tips?
posted by bedhead at 8:14 PM on May 14, 2009

Response by poster: They do not deduct the tip-out amounts (or percentages) from the credit card transactions or from the amount that servers claim at the end of each shift.

The way that they report tips on my paychecks (which I would think would also be true for the W-2) is that they add up the tip amounts that the server inputs into the computer at the end of each shift for each pay period.

I appreciate the help.
posted by melangell at 8:33 PM on May 14, 2009

You may want to read IRS Publication 531, Reporting Tip Income. From page 3:

"If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Do not report to your employer any portion of the tips you receive that you pass on to other employees."
posted by JackFlash at 10:36 PM on May 14, 2009 [1 favorite]

Jack Flash has the winner. Your company is doing it wrong, probably so they don't have to screw around with withholding taxes from the tips the busboys and dishwashers' paychecks.

If the company insists on doing this, there's probably a way to deduct the money.
posted by gjc at 3:17 AM on May 15, 2009

Best answer: I know a lot of my co-workers claim way less than what they make, but is that safe to do if the restaurant has a way of tracking the vast majority of what you made?

Having worked in a restaurant who did W-2s the same way (base it off what I claimed) while also knowing a waitress there who got audited and got in big trouble for claiming less than her CC totals, no I would say that is not safe. The CC receipts do leave an audit trail in case the IRS decides to come after you.
posted by jmd82 at 6:27 AM on May 15, 2009

The way that they report tips on my paychecks (which I would think would also be true for the W-2) is that they add up the tip amounts that the server inputs into the computer at the end of each shift for each pay period.

If your company reports more income on your W-2 than you actually make, because they're not factoring in the tip-out portion that isn't actually income for you, they are required to reissue your W-2 with correct information.

You should keep records of all tip-related money, cash or credit, if you can. (I realize this may not be possible, but it's the ideal situation.)
posted by oaf at 5:49 AM on May 16, 2009