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LegalGround >> ATTN Steve72


12/12/09 3:27 AM
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Unnamed
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Dear Steve,

You don't know me, as I don't post on either the UG or the OG often. I have, however, witnessed your conversations regarding income tax debates, and am confident that you can answer a question for me (if you have the time.)

I am a waiter at a restaurant in which paid out tips are mandatory (3.5 percent of my sales). I do not have an option to declare these tip outs in the computer system that records my income. Thus, I am declaring my total tips (plus tipout) and the recipients of this tipout (bartenders, bussers, etc) are declaring them also.

I find it hard to believe this is legal. What options do I have as far as not declaring this as income?

Thank you in advance, and if you don't want to give free advice, I understand.

Sincerely,

Me
12/13/09 8:04 PM
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Steve72
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 If it's your income (which it sounds like it is, since you are required to include it), and you are mandated by your employer to pay it, then the only option I can think of is to deduct it on your tax return.  To do this, though, you'd have to itemize your deductions.  Do you currently itemize?  If so, it's a work expense on Schedule A.

The better option, as you imply, would be to pressure the employer to update his payroll software so the busboys directly report this income, and it never "flows" through you.


1/8/10 8:34 AM
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Equus
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Member Since: 11/6/09
Posts: 547
 "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. "

www.irs.gov/publications/p531/ar02.html
1/8/10 9:33 AM
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Steve72
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That deals with the EMPLOYEE reporting to the EMPLOYER. It would require the employer to change the reporting structure (which is what I describe in the last paragraph).
1/8/10 9:51 AM
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Equus
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I'm not sure I get you. A waiter self reports their tips to their employer. If they tip out, that portion does not get reported by the person who tipped the money out, because it is not money that they are taking home with them at the end of the day. It may have passed through their hands, but it never belonged to them so it is not reported as income.

He said he is reporting the total tips, but he should only report the portion which is his to keep after tipping out. As long as it's over 8% of his allocable sales there is no further action to be taken by the employer.
1/8/10 9:54 AM
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Steve72
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Not in this case. The original post states that he doesn't have the option to exclude the tipouts.

It is a problem with the employer's policies, but it's not an illegal one.
1/25/10 2:17 PM
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Cookie Monster
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Steve72 loves breastfeeding

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