Now I know that many of you will not agree to that statement. Many of us have the misconception that we only need to report 8% of our total sales as tips.
The law states that you and I must report all (100%) tips we receive, except for the tips from any month that we do not total at least $20.00. The 8% allocation is a requirement placed on the employer. For more on this go to http://www.irs.gov/pub/irspdf/p1872.pdf.
Keep in mind that an IRS audit is no fun and you want to avoid the huge fees and penalties involved. Also, you need to claim tips in order to obtain Social Security and Medicare coverage. We can't stay young forever.
Yes, I know we don't get paid enough; the government taxes me enough already. I have rent to pay, CDs to buy, and the list goes on and on. So really why should you or I want to claim all our tips?
Well, let's see. How many servers or any tipped employees do you know that cannot rent or purchase a home, have to walk, ride a bus, or walk to work? Is it because they can't afford the payments?
Not in most cases. Most times it is because they don't have any or enough credit. Without credit we are stuck, walking or living with friends or family.
One of the major things creditors look for is proof of income and the ability to repay. That's right, if you can't prove your income, chances are that you will be denied a credit card, the opportunity to get your own living accommodations, or that new car you have been dreaming about.
Walking into a car dealership and bragging about how much money you make in tips at that nice new five-star restaurant will only get you the cold shoulder and blisters on your heels having to walk home. But if you go into that dealership with your current paycheck stub or W-4 showing all the mega bucks you earn (from the tips you reported), chances are you will be driving home in a nice shiny car.
Of course there is one drawback to reporting all your tips and owning that nice new car. Your fellow employees and friends will now expect you to be their taxi service.
Report all of your tips and I will be seeing you in the fast lane!
J.D. is a long time veteran of the restaurant industry. He is also an aspiring author who has just completed A Tip Training Guide for Restaurant Wait Staff for those who want to learn how to increase their tip income. For your FREE copy, visit http://www.tiptopserver.com. Have a question or comment for J.D.? Contact him at: Admin@tiptopserver.com.© 2007 J.D. Marshall
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