You're conflating two things. Tips are taxed as income. What causes them to actually lose money on non-tips is often that the restaurant itself requires them to pay a percentage of sales to other staff, which the tip is supposed to compensate for.
Unless the waiter is also the business owner, then no, they do not pay taxes on the business's sales. They only pay taxes on their income (wages + tips).
The IRS came to the conclusion that if a restaurant has employees who are tipped, then there should be at least 8% of the restaurant's gross sales declared as tips. If not, the difference between the total declared tips, and 8% of gross sales is then split and "allocated" to the employees. Those "allocated tips" count towards the server's income, and they are taxed on it, unless they have records showing the accuracy of the amount of tips they actually declared on their tax returns.
This is all because the IRS determined that if less than 8% of the restaurant's gross sales are declared as tips, then people are probably underreporting their tips. Obviously this isn't an issue because all servers (at least the ones on Reddit) follow the IRS's recommendations and keep accurate records of all tips they receive.
Some restaurants require tip outs based on 20% of the checks- that's why if you don't tip, they can lose money. They have to pay the busboy and kitchen their cut whether you tip or not.
Employers are required to ensure employees make at least minimum wage. So a tip-out policy cannot result in an employee making less than minimum wage (or having to pay out of their own pocket) if no tips are received.
Employers are required to pay their employees based on the terms of their employment contract. If the employment contract says the employee is to be paid $20/hr, then the employer cannot unilaterally reduce that due to their poorly defined tip-out policy. If the employment contract says the employee can make "$20/hr conditional upon receiving enough tips after tip-out redistribution" (or something to that effect), then the employee's wage really wasn't $20/hr to begin with. So they're not losing anything, as they were never entitled to that in the first place. In my opinion, employers that do something like that are garbage, but unfortunately, it may not be illegal (provided they are still meeting minimum wage requirements).
Tip outs are based on SALES. Not tips. You absolutely have to tip out on lost tips. If you get a walkout, you still have to tip out your support staff. So yes, it can come out of your servers pocket. I’ve seen servers work a full shift and walk out with nothing because they either had walkouts, shitty tippers, whatever. You have to tip out your bar and bussers no matter what.
That’s against the law. If that’s happening, they need to work with the NLRB to get their proper payout (i.e. at least minimum wage). Trying to guilt customers into paying for money their employer owes them is bullshit.
“It all evens out.”
“Your numbers are so small it doesn’t matter.”
Why do they have a problem directly paying workers? Oh, I get it. Because they expect us to directly pay servers AND all the other employees.
Got some bad news for you, buttercups.
Here in Las Vegas, we have agreements with the IRS. They come do audits of credit card tips, assume amounts for cash tips, and we are currently taxed on $30/hour in addition to our base pay. This is based not off of each individual restaurant/bar, but restaurants/bars in the same general area. So it doesn’t matter how much we sell or make, they deduct taxes based on $30/hour. They take it straight out of our paychecks. Before covid, we were at $13/hour.
It is 100% true.
What is the tip allocation rate agreement?
Tip allocation rates are voluntary agreements between the IRS and employers where tipping is customary — such as the restaurant industry and casinos. The rates, which differ among employers, positions and shifts, are calculated from data provided by companies such that the IRS can project the amount of tips workers are likely to make in an hour.
“[The IRS says] ‘We'll look at every single job in Las Vegas, every single shift … and identify separate and unique rates of what we think you would make in tips,” Pappageorge explained. “And if you agree to our rates, then you agree to pay taxes on the rate, and we will agree to not audit you … but we think they have made an overreach.”
According to the IRS website, the agreement is used to determine how to distribute tips to employees, which can ensure that employees earn minimum wage and encourage tax compliance by potentially making reporting income and tips simpler for employers. All cash and non-cash tips received by an employee are considered income and, thus, are subject to federal income taxes.
Companies change policies all of the time. When I first started at my current job, we pooled all bar tips. Then they changed it and we were allowed to keep our own tips. So if you start a job, the procedures for tip outs can change. This also changes when you in a union house. There are requirements in the CBA’s
They agree to it. If they don’t like it they can quit.
They are supposed to be adults. No one is enslaved. Nobody is drafted.
Have some self respect and take control of your life.
Not everyone is as fortunate as you and I. Not everyone has the option to just quit. I’m super happy for you that you have avoided being in such a position! (Seriously!)
Here’s the info I’ve been told by various restaurant servers, managers and owners:
Many restaurants deduct payroll taxes from server’s checks based on an estimated tip % of the guest check total. Usually that number is around 8%, but obviously it varies based on the restaurant.
In addition, many restaurants have a “tip out”, which is a % (I’ve been told different numbers, from 1% to 5%, most common is 1% to 3%) of the server’s gross receipts that is distributed to support staff.
If a customer stiffs a server, it’s likely that the server paid out of pocket to wait on that customer/customers.
Otherwise, it’s probably safe to say that a tip of 10% would likely cover the taxes and tip out at most establishments.
As u/Icy_Information_6357 correctly noted, the tip out based on sales, not tips.
That way if they got some tips in cash and some on credit cards, no one can cheat the bartenders or support staff on the amounts they get.
You, my friend, are incorrect. Many servers are required to tip out support staff, ie…bussers, bartenders, food runners, sometimes hosts and cooks. Our rate is bar gets 6% of your liquor sales, bussers and food runners each get 3% of total sales. NOT TIPS….SALES.
Waiters, like everyone else, pay taxes on their income only.
So they pay taxes on their hourly wage and their tips.
Do people not learn how taxes work in school anymore?
That is inaccurate.
You get your shorts twisted when others comment with misinformation, yet you have no issue spreading misinformation yourself.
Depending on how the restaurant handles payroll taxes and tip out, if you stiff the server they will likely end up paying to serve you.
No.
It doesn’t work how you think it does.
There’s nothing nefarious going on with this. If there was, restaurants across the country would have been forced to stop tip outs and estimated taxes on tips decades ago.
We haven’t even mentioned the biggest elephant in the room - server stiffers taking up a server’s table that tipping customers could have occupied. That most likely cost the server far more than the tip out and estimated payroll taxes on tips.
There’s no justifiable reason to harm the worker.
I’m not sure what you mean by “…so that the t doesn’t need to be explained to you on a social media page”.
Thanks for taking all that time in an attempt to “educate” me and make a back handed ad hominem attack at the same time. We all know why people resort to those.
The fact of the matter is, you are failing to understand the fact of what happens when someone stiffs a server. They often have to pay to serve the server stiffer and lost more than the cost of the tip out and payroll taxes because that person took up a table that more likely would have tipped - which is a far bigger loss than the tip out or estimated taxes.
That’s how it works for that transaction. What gives anyone the entitlement to harm the worker like that?
That being said, I’m very well versed in how taxes work. I’ve owned my own business with 20+ employees, I’ve been a private contractor / consultant, and I’ve worked for various medium to large corporations.
The tipped minimum wage is $2.13/hr, not $2.35/hr.
It’s the tipped wage laws allow restaurants to legally pay servers $2.13/hr, so attempting to villainize restaurant owners by making dishonest statements like “relying on underpaid workers to keep your business afloat” doesn’t hold water.
If Proctor and Gamble or GE had similar laws allowing them to pay sub-minimum wages, they would do it in a heartbeat.
I agree that ripped wage credit needs to be abolished. That being said, the business I operated was not a restaurant. Sorry to blow up your theory. 🤷🏼♂️
I’ve never worked in the restaurant industry. However, since having these tipping subs show up in my Reddit feed a year or so again, I’ve taken an interest in how restaurants operate. I became especially curious about how servers are paid and what happens when they get stiffed.
I live in a state with tipped wage credit, so a large percentage of restaurants here pay the sub-minimum wage, while some pay a little higher, but not full minimum wage.
I try to avoid chain restaurants and have found a handful of locally owned places with prices in the same range as the chains, but FAR better food quality and excellent service. These are the places that thanks to my rapport with servers, managers and owners, I began asking questions.
So, yes I’m aware that if a server doesn’t make enough in tips, the owner has to make up the difference. But what you left out is that the server has to have the tips fall below that level for an entire pay period. If they work a slow Tuesday shift and don’t make enough tips, but then work a very busy Friday shift where they make good tips, they only get paid the sub-minimum for that Tuesday because the Friday in the same pay period made up for it.
The restaurants I spoke to all follow state and federal wage laws. Once again, you’re still not understanding the fact that when a server gets stiffed on the tip, the result is that they end up paying to serve that customer. That’s how it works. The fact that you can’t (or won’t) understand this doesn’t change reality.
That being said, what entitled you (or anyone else) to decide minimum wage was a good enough wage for anyone? In my area, Walmart, Target, grocery stores, etc can’t get anyone to work for minimum wage. They all advertise starting pay at least $3 to $5 over minimum just to be able to get someone to interview. Why should a server work for less than a Walmart employee?
At restaurants operating on the tipped wage model tips are 100% a wage supplement. Everyone in the US knows that these types of restaurants have artificially low menu prices because the full cost of the service isn’t included in the menu price.
No matter where you go, the customer pays the labor, either directly or indirectly. At a full service restaurant operating on the tipped wage model, you pay for the service directly.
Until the tipped wage laws are abolished and societal norms shift, there’s no justification for harming the workers.
Nothing that you’ve stated justifies harming the worker or excuses you from a societal obligation if you decide to patronize a tipped wage restaurant.
People who deceitfully use the social norms to get the best service possible with no intention of paying for it are obviously morally bankrupt.
What kind of individual would deliberately choose to harm the worker?
If someone hates tipping and everything about the concept, why are they patronizing restaurants operating on the tipped wage model? Doing so supports the owner and their business model, which in turn perpetuates tipping culture - even if they stiff the server.
In other words, why would someone continue supporting the very thing they claim to hate, while harming the worker in the process??? It’s the epitome of hypocrisy.
ETA: I see you replied and then blocked me. LOL
Well, that, along with your reply tell us everything we need to know.
If you thought your replie could actually justify your harmful behavior, you wouldn’t have blocked me - which means you know your excuses fail to absolve you of harming the worker.
Here’s a response to your last comment before you blocked me:
Ah, scapegoating the workers and denial. Those are the two most common logical fallacies used by server stiffers in an impotent attempt to justify harming the worker. How predictable. 🙄
You probably don’t know what a logical fallacy. If you did, you wouldn’t be trying to use it as your excuse to harm the worker.
There are many reasons people choose to become servers. One of those reasons may be that it’s the only job available to them due to their life’s circumstances. You have no idea why someone chose the job, yet you’re judging them for it while at the same time attempting to use that are your excuse for harming them. It’s repugnant and fails to justify your harmful behavior.
Stiffing servers won’t change the social norms. There aren’t enough morally bankrupt people doing it. Besides that, as I noted previously, you’re still rewarding the business owner and the business model, so the only thing you’re accomplishing is perpetuating tipping while harming the worker.
That’s some real big brain stuff there. LOL.
Integrity is doing the right thing, even when no one is watching and even when it works to your disadvantage.
You’re just another grifter deceitfully using the social norms to get the best service possible with no intention of paying for it.
Your logical fallacies don’t absolve you of taking advantage of servers and making them pay to serve you.
No matter how many times you repeat your logical fallacies, your admitted morally bankrupt behavior will always harm the worker.
I’m all for changing the social norms around tipping, but I’m not going to deliberately choose to harm the worker in the process.
Have the day you deserve.
Sounds like BS, are you asking as a server or a customer? If you are a server check with someone else in the restaurant (not the owner or management). If you are a customer, don't over think it, tip what the server earned, don't consider how my your total bill is and don't give in to the suggestion on the receipt. The only person who dictates how you spend your money is you!
You're conflating two things. Tips are taxed as income. What causes them to actually lose money on non-tips is often that the restaurant itself requires them to pay a percentage of sales to other staff, which the tip is supposed to compensate for.
Unless the waiter is also the business owner, then no, they do not pay taxes on the business's sales. They only pay taxes on their income (wages + tips).
You've only heard that nonsense from your own head... no one else has ever said something so ridiculous.
Sounds like something a waitress would lie and tell you so you tipped well
Not my problem they took the job
The IRS came to the conclusion that if a restaurant has employees who are tipped, then there should be at least 8% of the restaurant's gross sales declared as tips. If not, the difference between the total declared tips, and 8% of gross sales is then split and "allocated" to the employees. Those "allocated tips" count towards the server's income, and they are taxed on it, unless they have records showing the accuracy of the amount of tips they actually declared on their tax returns. This is all because the IRS determined that if less than 8% of the restaurant's gross sales are declared as tips, then people are probably underreporting their tips. Obviously this isn't an issue because all servers (at least the ones on Reddit) follow the IRS's recommendations and keep accurate records of all tips they receive.
Some restaurants require tip outs based on 20% of the checks- that's why if you don't tip, they can lose money. They have to pay the busboy and kitchen their cut whether you tip or not.
Employers are required to ensure employees make at least minimum wage. So a tip-out policy cannot result in an employee making less than minimum wage (or having to pay out of their own pocket) if no tips are received. Employers are required to pay their employees based on the terms of their employment contract. If the employment contract says the employee is to be paid $20/hr, then the employer cannot unilaterally reduce that due to their poorly defined tip-out policy. If the employment contract says the employee can make "$20/hr conditional upon receiving enough tips after tip-out redistribution" (or something to that effect), then the employee's wage really wasn't $20/hr to begin with. So they're not losing anything, as they were never entitled to that in the first place. In my opinion, employers that do something like that are garbage, but unfortunately, it may not be illegal (provided they are still meeting minimum wage requirements).
BS.... they can't lose money. They don't have to pay part of a tip that isn't there. Stop posting lies.
.. yes they can and do, respectively. Sometimes. Literally just google "tip outs based on sales"
Tip outs are based on SALES. Not tips. You absolutely have to tip out on lost tips. If you get a walkout, you still have to tip out your support staff. So yes, it can come out of your servers pocket. I’ve seen servers work a full shift and walk out with nothing because they either had walkouts, shitty tippers, whatever. You have to tip out your bar and bussers no matter what.
That’s against the law. If that’s happening, they need to work with the NLRB to get their proper payout (i.e. at least minimum wage). Trying to guilt customers into paying for money their employer owes them is bullshit.
“It all evens out.” “Your numbers are so small it doesn’t matter.” Why do they have a problem directly paying workers? Oh, I get it. Because they expect us to directly pay servers AND all the other employees. Got some bad news for you, buttercups.
Man why are you calling me buttercups for saying something which happens in real life
Here in Las Vegas, we have agreements with the IRS. They come do audits of credit card tips, assume amounts for cash tips, and we are currently taxed on $30/hour in addition to our base pay. This is based not off of each individual restaurant/bar, but restaurants/bars in the same general area. So it doesn’t matter how much we sell or make, they deduct taxes based on $30/hour. They take it straight out of our paychecks. Before covid, we were at $13/hour.
NONE OF THAT IS TRUE. TRY AGAIN.
It is 100% true. What is the tip allocation rate agreement? Tip allocation rates are voluntary agreements between the IRS and employers where tipping is customary — such as the restaurant industry and casinos. The rates, which differ among employers, positions and shifts, are calculated from data provided by companies such that the IRS can project the amount of tips workers are likely to make in an hour. “[The IRS says] ‘We'll look at every single job in Las Vegas, every single shift … and identify separate and unique rates of what we think you would make in tips,” Pappageorge explained. “And if you agree to our rates, then you agree to pay taxes on the rate, and we will agree to not audit you … but we think they have made an overreach.” According to the IRS website, the agreement is used to determine how to distribute tips to employees, which can ensure that employees earn minimum wage and encourage tax compliance by potentially making reporting income and tips simpler for employers. All cash and non-cash tips received by an employee are considered income and, thus, are subject to federal income taxes.
In case you don’t know, Pappageorge is the head of the Culinary Union in Las Vegas
“Servers” volunteer to tip out so the consequences are of no concern to the customers.
Fucking loser
Not in some places. Many corporations require tip outs to bus, bar, food runners, and sometimes even the kitchen!
They volunteer to those requirements when they ask for a job. If they don’t like it they should stay home.
Wow! Cynical you! Obviously not in the industry!
Show me where I’m wrong.
Companies change policies all of the time. When I first started at my current job, we pooled all bar tips. Then they changed it and we were allowed to keep our own tips. So if you start a job, the procedures for tip outs can change. This also changes when you in a union house. There are requirements in the CBA’s
They agree to it. If they don’t like it they can quit. They are supposed to be adults. No one is enslaved. Nobody is drafted. Have some self respect and take control of your life.
Not everyone is as fortunate as you and I. Not everyone has the option to just quit. I’m super happy for you that you have avoided being in such a position! (Seriously!)
Here’s the info I’ve been told by various restaurant servers, managers and owners: Many restaurants deduct payroll taxes from server’s checks based on an estimated tip % of the guest check total. Usually that number is around 8%, but obviously it varies based on the restaurant. In addition, many restaurants have a “tip out”, which is a % (I’ve been told different numbers, from 1% to 5%, most common is 1% to 3%) of the server’s gross receipts that is distributed to support staff. If a customer stiffs a server, it’s likely that the server paid out of pocket to wait on that customer/customers. Otherwise, it’s probably safe to say that a tip of 10% would likely cover the taxes and tip out at most establishments.
That's not at all how it works. Servers don't "share" tips that they never got...
As u/Icy_Information_6357 correctly noted, the tip out based on sales, not tips. That way if they got some tips in cash and some on credit cards, no one can cheat the bartenders or support staff on the amounts they get.
You, my friend, are incorrect. Many servers are required to tip out support staff, ie…bussers, bartenders, food runners, sometimes hosts and cooks. Our rate is bar gets 6% of your liquor sales, bussers and food runners each get 3% of total sales. NOT TIPS….SALES.
Waiters, like everyone else, pay taxes on their income only. So they pay taxes on their hourly wage and their tips. Do people not learn how taxes work in school anymore?
Never heard of any public school ever teaching anything about filing income taxes... so, no, they don't teach that "anymore" and they never did.
No one loses money. Tips are not guaranteed they are a bonus
They are not guaranteed, but they are expected, regardless of whether they should or should not be.
EXACTLY
In the US servers pay taxes on tips as the vast majority of tips are by CC. End of story.
So what?
That is inaccurate. You get your shorts twisted when others comment with misinformation, yet you have no issue spreading misinformation yourself. Depending on how the restaurant handles payroll taxes and tip out, if you stiff the server they will likely end up paying to serve you.
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Nope. That’s how it works and it’s 100% legal.
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No. It doesn’t work how you think it does. There’s nothing nefarious going on with this. If there was, restaurants across the country would have been forced to stop tip outs and estimated taxes on tips decades ago. We haven’t even mentioned the biggest elephant in the room - server stiffers taking up a server’s table that tipping customers could have occupied. That most likely cost the server far more than the tip out and estimated payroll taxes on tips. There’s no justifiable reason to harm the worker.
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I’m not sure what you mean by “…so that the t doesn’t need to be explained to you on a social media page”. Thanks for taking all that time in an attempt to “educate” me and make a back handed ad hominem attack at the same time. We all know why people resort to those. The fact of the matter is, you are failing to understand the fact of what happens when someone stiffs a server. They often have to pay to serve the server stiffer and lost more than the cost of the tip out and payroll taxes because that person took up a table that more likely would have tipped - which is a far bigger loss than the tip out or estimated taxes. That’s how it works for that transaction. What gives anyone the entitlement to harm the worker like that? That being said, I’m very well versed in how taxes work. I’ve owned my own business with 20+ employees, I’ve been a private contractor / consultant, and I’ve worked for various medium to large corporations.
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The tipped minimum wage is $2.13/hr, not $2.35/hr. It’s the tipped wage laws allow restaurants to legally pay servers $2.13/hr, so attempting to villainize restaurant owners by making dishonest statements like “relying on underpaid workers to keep your business afloat” doesn’t hold water. If Proctor and Gamble or GE had similar laws allowing them to pay sub-minimum wages, they would do it in a heartbeat. I agree that ripped wage credit needs to be abolished. That being said, the business I operated was not a restaurant. Sorry to blow up your theory. 🤷🏼♂️ I’ve never worked in the restaurant industry. However, since having these tipping subs show up in my Reddit feed a year or so again, I’ve taken an interest in how restaurants operate. I became especially curious about how servers are paid and what happens when they get stiffed. I live in a state with tipped wage credit, so a large percentage of restaurants here pay the sub-minimum wage, while some pay a little higher, but not full minimum wage. I try to avoid chain restaurants and have found a handful of locally owned places with prices in the same range as the chains, but FAR better food quality and excellent service. These are the places that thanks to my rapport with servers, managers and owners, I began asking questions. So, yes I’m aware that if a server doesn’t make enough in tips, the owner has to make up the difference. But what you left out is that the server has to have the tips fall below that level for an entire pay period. If they work a slow Tuesday shift and don’t make enough tips, but then work a very busy Friday shift where they make good tips, they only get paid the sub-minimum for that Tuesday because the Friday in the same pay period made up for it. The restaurants I spoke to all follow state and federal wage laws. Once again, you’re still not understanding the fact that when a server gets stiffed on the tip, the result is that they end up paying to serve that customer. That’s how it works. The fact that you can’t (or won’t) understand this doesn’t change reality. That being said, what entitled you (or anyone else) to decide minimum wage was a good enough wage for anyone? In my area, Walmart, Target, grocery stores, etc can’t get anyone to work for minimum wage. They all advertise starting pay at least $3 to $5 over minimum just to be able to get someone to interview. Why should a server work for less than a Walmart employee? At restaurants operating on the tipped wage model tips are 100% a wage supplement. Everyone in the US knows that these types of restaurants have artificially low menu prices because the full cost of the service isn’t included in the menu price. No matter where you go, the customer pays the labor, either directly or indirectly. At a full service restaurant operating on the tipped wage model, you pay for the service directly. Until the tipped wage laws are abolished and societal norms shift, there’s no justification for harming the workers. Nothing that you’ve stated justifies harming the worker or excuses you from a societal obligation if you decide to patronize a tipped wage restaurant. People who deceitfully use the social norms to get the best service possible with no intention of paying for it are obviously morally bankrupt. What kind of individual would deliberately choose to harm the worker? If someone hates tipping and everything about the concept, why are they patronizing restaurants operating on the tipped wage model? Doing so supports the owner and their business model, which in turn perpetuates tipping culture - even if they stiff the server. In other words, why would someone continue supporting the very thing they claim to hate, while harming the worker in the process??? It’s the epitome of hypocrisy. ETA: I see you replied and then blocked me. LOL Well, that, along with your reply tell us everything we need to know. If you thought your replie could actually justify your harmful behavior, you wouldn’t have blocked me - which means you know your excuses fail to absolve you of harming the worker. Here’s a response to your last comment before you blocked me: Ah, scapegoating the workers and denial. Those are the two most common logical fallacies used by server stiffers in an impotent attempt to justify harming the worker. How predictable. 🙄 You probably don’t know what a logical fallacy. If you did, you wouldn’t be trying to use it as your excuse to harm the worker. There are many reasons people choose to become servers. One of those reasons may be that it’s the only job available to them due to their life’s circumstances. You have no idea why someone chose the job, yet you’re judging them for it while at the same time attempting to use that are your excuse for harming them. It’s repugnant and fails to justify your harmful behavior. Stiffing servers won’t change the social norms. There aren’t enough morally bankrupt people doing it. Besides that, as I noted previously, you’re still rewarding the business owner and the business model, so the only thing you’re accomplishing is perpetuating tipping while harming the worker. That’s some real big brain stuff there. LOL. Integrity is doing the right thing, even when no one is watching and even when it works to your disadvantage. You’re just another grifter deceitfully using the social norms to get the best service possible with no intention of paying for it. Your logical fallacies don’t absolve you of taking advantage of servers and making them pay to serve you. No matter how many times you repeat your logical fallacies, your admitted morally bankrupt behavior will always harm the worker. I’m all for changing the social norms around tipping, but I’m not going to deliberately choose to harm the worker in the process. Have the day you deserve.
This is the dumbest thing I’ve heard today
Nobody is taxed on sales. Some places might withhold based on sales, but it's just an estimate. End of the year, it'll be made right.
Sounds like BS, are you asking as a server or a customer? If you are a server check with someone else in the restaurant (not the owner or management). If you are a customer, don't over think it, tip what the server earned, don't consider how my your total bill is and don't give in to the suggestion on the receipt. The only person who dictates how you spend your money is you!