I know a guy who is a waiter in a restaurant. He gets around $1000 as wage, by check. But he also makes $150- $200 per week extra as
tips given by customers. As these are undocumented income and it varies highly, is there any problem if he don't show it on tax papers?
2006-12-14 08:50:48 · 10 answers · asked by Legend 3 in Business & Finance ➔ Taxes ➔ United States
Quick 'tip' for all you waiters and waitresses out there: Don't forget that it can sometimes benefit you to claim all of your tips, depending on your other income and how much you make. Yes, legally, you must claim it all, but we all know that you don't necessarily. Here's where it can benefit you: If you are working someplace where you make very little, and qualify for the Earned Income Credit, it is possible that the more you earn (wages and tips), the more EIC you'll get in your refund. You could also qualify for the Additional Child Tax Credit (assuming you have children) which is based on income, and could also boost your refund. You might also want to report higher income so that you can sock more money into Social Security (ick) or an IRA (yay!) so that you have a better retirement.
However, to reiterate the previous responses, it is definitely tax fraud NOT to report any and all income. Believe it or not, the IRS wants to know if you barter with someone, if you sell some crafts to friends and neighbors, and if you win $5 on a scratch-off lotto ticket. While much of this does indeed go unreported, it is possible to get caught and you can land yourself in some big trouble if you do.
2006-12-14 09:22:08 · answer #1 · answered by Katie Short, Atheati Princess 6 · 3⤊ 0⤋
Tax princess has a great response. I would add that if any of the tips are included in credit card payments, the IRS has access to information about what percentage of the meal cost is typically added as a tip. It is not rocket science to estimate how much the waiter's delivered meal costs are, and a simple calculation to come up with the amount that the tips ought to be. If the waiter does not report an amount somewhere around what it should be, the waiter may be audited. The employer may also be audited if there is suspicion that the employer is abetting tax fraud.
Cheating on your taxes, even when you are "sure" you can't get caught, is not just illegal. It's industrial strength stupidity.
2006-12-14 09:33:37 · answer #2 · answered by byhisello99 5 · 1⤊ 0⤋
Tips are taxable income. Probably no waiter or waitress honestly reports all of his or her tips. The IRS does scan returns and looks for tips being declared for certain job descriptions.
If you are a barber, hair stylist, waiter and do not show tips income, there is a 50-50 chance the return will be audited.
2006-12-14 09:01:44 · answer #3 · answered by regerugged 7 · 2⤊ 1⤋
Is it subject to income tax??? YES Even if the IRS would otherwise never find it?? Yes
Does it always get reported and taxed?? No
Is there a problem if he does not report it? No not if he has no conscience and does not mind breaking the law by not paying the taxes he owes.
2006-12-14 08:57:22 · answer #4 · answered by zudmelrose 4 · 2⤊ 0⤋
yes, the undocumented income does get taxed. tips at a restaraunt do not have to be reported if they are under $20. however, anything more than that, the whole amount get's reported to the IRS and is taxed. if he does not show the tips on his income tax, he can be arrested and presecuted for tax evasion and fraud, both of which are federal offences (Felonies)
2006-12-14 09:00:28 · answer #5 · answered by Loremaster21 1 · 0⤊ 1⤋
As previous said, it should be declared but if he doesn't mind not paying what he owes, more power to him.
He'd just better remember that the tax man can always come knocking and demand back taxes as well as penalties and interest. They might catch on because you have to declare your job on your tax forms (at least I have to) and they might get very suspicious that he never declares any tips.
2006-12-14 08:59:49 · answer #6 · answered by parsonsel 6 · 2⤊ 0⤋
Undocumented Income
2017-02-20 12:18:08 · answer #7 · answered by ? 4 · 0⤊ 0⤋
Yes, the income is taxable, and yes, if he is not reporting this income and he gets caught, he'll have some problems.
2006-12-14 09:01:46 · answer #8 · answered by goicuon 4 · 1⤊ 0⤋
tax princess and the answer after hers are both great.
parsonsel said you have to declare your occupation. There is a place for this information on next to your signature, but I don't believe it is required. I always leave it blank and they haven't complained yet.
2006-12-14 09:49:26 · answer #9 · answered by STEVEN F 7 · 0⤊ 2⤋
funk that i didnt report half my tips. i gotta live to man. but how does that guy make that much in sallary but not so much in tips. i always made twice my sallary in tips.
2006-12-14 09:00:26 · answer #10 · answered by candi o 2 · 0⤊ 2⤋