Quote:
Originally Posted by OrangeBlossomBaby
The employee is /supposed/ to declare 100% of their income including tips, and take whatever deductions they're entitled to take, whether standard or itemized.
But at the restaurant in my posts, the server gets to keep all cash tips. Only the credit card tips are pooled, and employees (all of them) end up averaging $10/hour in their paychecks. That's why I think there's some pretty shady shenanigans going on with their manager or store owner.
It also explains the high turnover there.
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The server doesn't need to declare 100 percent of their tip income. The IRS has an 8 percent rule for restaurant tip income. The restaurant is required to calculate 8 percent of their total gross income and provide a Form W-2 to each tipped employee based a proration of the number of hours they worked during the year. Then, the employee can either pay income taxes based on the W-2, or they can dispute the amount and declare a smaller amount of tip income.