On 29-Feb-12 15:46, Adam H. Kerman wrote:
Stephen Sprunk wrote:
In the US, I rarely hear of restaurants not passing on tips to waiters,
but they _do_ have to take out taxes and report that income to the
gov't, whereas it's up to the waiter to report cash tips--and most
don't. This can add up to a significant difference in income for a
waiter, especially given all the special tax credits and such they can
qualify for by not reporting most of their income.

That law changed a long time ago. The employee reports both cash and
credit tips, not just cash, to his employer.

What the law says and what actually happens are often quite different.

... IRS checks this, too.

Due to perennial underfunding, the IRS now almost exclusively focuses
its limited audit resources on individual taxpayers claiming an income
less than reported by others (via W2 or 1099) and self-employed
taxpayers claiming business losses three-plus years in a row. Either of
those situations pretty much guarantees an audit, but nearly any other
income tax fraud by individuals will go undetected.

Payroll taxes are withheld at the usual rates on both wages and tips.

.... except the employer doesn't _have_ the cash tips, so they may end up
withholding the employee's entire wages to get enough. Of course, they
will ensure employees report at least enough tips to match the normal
minimum wage, otherwise the employer has to make up the difference.
Above that, though, they don't seem to care.

S

--
Stephen Sprunk "God does not play dice." --Albert Einstein
CCIE #3723 "God is an inveterate gambler, and He throws the
K5SSS dice at every possible opportunity." --Stephen Hawking