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.

I can see you haven't been a waiter for a while! The IRS requires that the
restrauant "impute" the cash tips and withhold taxes accordingly. It's up to you
to prove the value of the cash tips if you disagree.

http://answers.yahoo.com/question/in...5204907AAnoz6r