Quote:
Originally Posted by Bobcuse
I must be naive about leaving tips on my credit card. I always try to be generous with tipping good servers but never thought about the tax implications for them as I didn't know anything about how tips are reported as income. In reading another post somewhere here, I thought it implied that the total food bill is assigned to a server and the IRS assumes that 18% of the bill should be tip income for that server? Can someone clarify please....is a cash tip more beneficial for a server, and do these servers at Carrabbas, Outback, et al share their tips? Thanks for the info.
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If you can avoid it, do not leave the tip on the credit card -- pay it in cash. You may tip 20% but many tip 10% (some even less or nothing regardless of how good the service). The IRS is going to deduct a minimum of 18% of the bill, so, yes, paying in cash does help the server -- the IRS can't claim the server is making more than 18% . So far as I know, the larger chains don't pool their tips but many small restaurants do. Also, some restaurants (including some of the chains) immediately take 10% of either the tip or the bill (whichever is larger) for tipouts.
BTW -- My comment on $7.67 was using the factors that were given to "insure" the worker got the minimum wage. If only it was true!