Stephen Sprunk wrote:
On 29-Feb-12 18:31, Adam H. Kerman wrote:
Stephen Sprunk wrote:
On 29-Feb-12 17:06, Adam H. Kerman wrote:
Stephen Sprunk wrote:
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.

Yes, Stephen. You still failed to note that the employee is required
to report ALL tips to his employer, not just cash tips, which is
why I followed up.

The _law_ may require them to report all tips, but what _actually
happens_ is often quite different.

You are still missing the bit that they are required to report ALL tips,
not just tips received in cash. ALL tips, including those via credit cards.
At the very least, the employer will compare the credit card tip reports
with his own records to see if they match.

The employee doesn't _need_ to report credit card tips to the employer
since the employer is the one that collects and passes on (minus
withholding) those tips to the employee.

Yes he does, Stephen. This is why you are so beloved. You get something
wrong, then keep arguing about it. This is now your third followup,
still repeating the same error.

There may be some obscure regulation requiring the employee to report
that information back to the employer, but all they would have to do is
hand in copies of their pay stubs, so it's just a waste of time.

It's not "some obscure regulation". It's the law. 26 U.S.C. 6053(a)

Would you like to own up to your error, or keep repeating it in
several more followups?

The discussion above was obviously about _cash_ tips, which are an
entirely different matter. The employer (and therefore the IRS) only
knows what the employee _reports_, not what they actually _received_.

Again, also in 6053, the employer is required to impute tips at the rate
of 8% (unless he's allowed to impute a lower rate) and allocate said
imputed tips. It's all reported on schedules filed with IRS, and analyzed.
It may not result in a personal visit by an auditor, but the computer is
quite capable of generating nasty letters and beginning the process of
assessing penalties for underreporting and interest for underwithholding.

This analysis will check for something simple like waiters reporting
a much lower tip rate for tips received in cash versus on credit slips.
Again, these are aggregated separately for reporting.

IRS doesn't go solely by what's reported by the employee. The law requires
that specific assumptions be made about income earned as tips. An employee
may get away with a small amount of underreporting, but not an amount
significantly less than 8%.

Do you understand yet? There's still going to be underreporting, but
there'll be a lot less than there used to be.