How much do you have to claim in your tips when you are a server, by law?
You have to report all your tips. Your employer has to withhold taxes on 8% of your sales.Also if you do not get enough tips to cover the minimum wage the employer has to make up the difference.
The IRS wants you to declare ALL your tips so they can charge you as much money in taxes as possible. I've always declared around 10% of my sales for tips because that is a reasonable amount and won't raise suspicion at the IRS. Some restaurants will automatically declare a percentage of your income as tips regardless of what you ACTUALLY made in tips. If your company automatically claims 15% of your sales as tips but you only averaged 10% that night/year, then you'll be paying taxes on the difference-which is money you never even made!
By law, you have to claim it all. The IRS has been cracking down on restaurants and waiters/waitresses. They know about how much each patron leaves as a tip so if the employees of a restaurant under-report their tips, the IRS may come in and assess an estimated amount of tips to your employer. Obviously, your employer won't appreciate this too much and may start making you report all your tips to him every night before you leave work. I've seen it happen.
"Q: I was told that I had to report only eight percent (8%) of my total sales as tips. Is this true?
A: No. You must report to your employer all (100%) tips you receive, except for the tips from any month that do not total at least $20.00. The 8% allocation rule is a requirement placed on the employer."
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