Tipping: Cash vs Credit

[PepperElf]

Not a debate on whether or not you should tip. (please let it stay that way )

No link yet, cos I'm still looking it up, but... I received an interesting email from Mom.


Apparently there's been some research about tipping, and that when you tip via credit card the manager is suppose to give the tip money to the waiter/waitress... but they aren't. I guess in some places they're only giving them enough to bring them up to minimum wage and are keeping the rest to themselves.


So that (if you tip) it's better to tip in cash cos they get to keep more of it, and (this part I suspect is wrong) don't have to report it.


Anyone else know of tip-withholding happening like that?

[smileyeagle1021]

I just always give cash... not so much because I don't trust the management, but because a lot of the waiters I've known have told me they like cash tips because it's easier to keep up their job moral when they are getting those couple of dollars several times an hour rather than just once at the end of the day/week/payperiod.

[BookstoreEscapee]

Not true that they don't have to declare cash tips; they do. From a tax perspective, I guess it would be easier to keep track of what they actually bring in if they are on a credit card. I'm sure there are those who regularly under-report their cash tips, just because they can with relatively little risk, since no one else sees it.

As far as cash vs. credit and whether they get the whole tip, I can see how cash tips are easier for them to keep straight how much they should actually have; I would hope the majority of restaurants are honest enough to give their servers the full tip, but I don't doubt that there are some people unscrupulous enough to keep some of it. Then again, at a lot of places servers are required to split tips with bussers and other support staff. I don't know how that works. I usually put the tip on the card, if I'm paying that way, mostly because it's just easier for me.

[Racket_Man]

just to crystal clear clarify

according to the US Dept of Labor rules and Reg's:

the tipped employee is required to retain any and all tips whether or not the employer elects to take a tip credit for tips received, EXCEPT to the extent the employee participates in a valid tip pooling arrangement

(more stuff in between)

Retention of Tips
the law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received become the property of the employer. A tip is the SOLE property of the tipped employee

quoted from USDOL Fact sheet #15 tipped employees under the Fair Labor Standards Act

what those business are doing is severly breaking the law. no question do not pass go do not collect $200

I will have to find the specific reg number and title but what they are doing is very illegal.

ETA:
link to a discussion on tipping.org where this is brought to light
http://www.tipping.org/discus4/messages/9/3406.html

Link to the DOL Fact sheet
http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf

and it does not matter what state you are in. in this case Federal Law trumps state law.

[Broomjockey]

Yeah, any place that keeps credit tips isn't going to baulk at keeping cash tips either.

[CaroPhoenix]

Also, don't waiters/waitresses get taxed on credit card tips the day they get them as compared to cash tips? Or am I just completely confused and have no idea what my little old brain is talking about?

[RecoveringKinkoid]

I am not above simply asking the waiter if he gets the entire tip if I tip him on plastic. I have done that before. I don't think a waiter would mind this question when it's clear that you are trying to make sure he's taken care of.

[taxguykarl]

Also, don't waiters/waitresses get taxed on credit card tips the day they get them as compared to cash tips? Or am I just completely confused and have no idea what my little old brain is talking about?

Anyone who receives a tip technically gets taxed on that.

More often than not, it is the only the chains that actually report tips on W-2's due to IRS pressure. I have seen quite a few wait staffers report tips not on the W-2 in order to boost income for the purposes of obtaining a loan or qualifying for more EITC.

Per IRS regulations, any tips over $20/month have to be reported. In the case of cash or credit tips: The IRS totals the tips by credit and debit card and extrapolates the percentage to bills paid in cash to determine what the cash tips "should" be (i.e. what to report to avoid scrutiny and very likely an audit).

If a restaurant tab is paid by check but the tip in unverifyable cash, then the average tip percent is lowered. This is the reason, Mrs. TGK and I only tip in cash. Yes, that is the explaination I gave to a waitress who happened to be a client of mine.

Does that answer your query, idrinkarum?

If you have a tax question specific to your situation, you are more than welcome to PM me about that.

[CaroPhoenix]

Yes, thank you TGK! I'll try to pay tips in cash more often.

[sms001]

Yes, thank you TGK! I'll try to pay tips in cash more often.

We do as often as possible.

I once worked a delivery job where I strongly suspect the owner kept some tips. There were 'House Accounts' for several of the larger businesses in the area that could just sign for a delivery. I was occasionally told that they'd "put the tip on the requisition payment." Most of the time I'm sure this was just to stiff me (and on hundred dollar orders too! ) but not ALL of them could have been.... and I never saw a nickle. So it does happen.

As a side note - we usually pay by debit, so we ALWAYS fill in the Tip:______ area with the word 'Cash.' Helps prevent addendum by the dishonest.

[taxguykarl]

I strongly suspect the owner kept some tips.

There's an easy way to check on that. W-2's have a special line for tips.

As a side note - we usually pay by debit, so we ALWAYS fill in the Tip:______ area with the word 'Cash.' Helps prevent addendum by the dishonest.

We fill in 0 and make sure to fill the correct grand total--no problems yet.

[sms001]

I strongly suspect the owner kept some tips.

There's an easy way to check on that. W-2's have a special line for tips.

Sadly, no. End of cycle billing goes out, company I delivered to receives it. They MAY send back an itemized notation with the check stating "Here's the $600.00 we owe, plus $50.00 for gratuity." But there's one check for $650.00. Good owner passes the fifty on to employee. Bad owner just throws the check in the bank.

[gremcint]

I use whatever I have on me, sometimes it's just easier to use the credit or debit. If the employer is keeping one type of tip then he is most likely keeping them all anyways.