Do waiters pay 8% tax on each table they serve, so if you tip less than 8%, it costs them money???

Question

This sounds like nonsese to me, but I just read it at: http://bayareaopinions.blogspot.com/
"Notably, servers pay 8% tip tax for each table they serve, whether they receive a tip or not. So any tip less than 8% really costs then money to wait on your table!"
I've heard of "income tax", but not "table tax"....hahaha!!! is this guy kidding?

Ok, ok, ok, but this is still misleading......
Say a dinner bill is $100, and the govt assumes you were tiped 8%, that would be a tip income of $8. Assuming you're in a 15% tax bracket, then your income tax would be $1.20 on that $100 tab. So the customer would have to tip you less than $1.20, which is a 1.2% tip, for you to actually lose money!

Read here:
http://tip20.com/div/con/articles/whytotip.html
There is a misconception that servers are required to report their tips as at least 8% of their sales revenue. 8% is simply a bottom line that the IRS uses when attempting to determine how much a server earned in tips over the year. The IRS does not expect to be paid 8% of a server's sales as tax - that would be akin to taxing the customer for their bill. What it means is that in the absence of documentation to show how much that server earned in tips the IRS is going to assume that they earned at least 8% of their food and beverage sales. So if a server sells $1,000 of food than the IRS is going to automatically assume that they took home $80 in tips that night. They're going to treat that $80 as taxable income and depending on what tax bracket the server is in they (the IRS) might get 25% of the $80 which is $20. (and the server will get $60, which is NOT losing money!)

Answer 1

This is very misleading, especially the way you have written it.

Yes, waitstaff must pay tax on an assumed tip in many establishments but what it comes out to is reporting 8% as income NOT paying 8%. The person then must pay tax based on that amount. This does not include all waitstaff in every restaurant (McDonald's comes to mind), but it is a gripe of many.

The flipside to this is that it is only 8% and not 15% or 20% and, since the average tip (at least from my memory in the serving industry) is 15% or higher, there is a lot of room for leeway. Say, for example, that you wait 10 tables and each is a $100 meal. You have to report as income the assumed tip of $8 at each table. Now say that each of those tables tipped you $20. Nobody will ever know if you choose to only report 8% instead of 20%.

By law, you are actually required to report ALL your tips, but nobody ever did or does, so they (the govt.) decided to make it mandatory to report at least 8% of each bill or about half of what the average tip is.

In other words, since people weren't reporting any tips, now people are automatically forced to report about half of them.

Answer 2

No doubt a politician owns (or has a share in) this company who are supplying all the muffins and coffee. EDIT: This is an interesting fact you might like to know. In the country I live in the Americans have the largest army base outside America and of course have to contract and outsource to get a lot of what they need. I sourced a carpenter to create two office desks which the US Army paid $16,000 for! They were very specific about the size of the tray in one compartment of the desk. Not sure what they were using the compartment for but obviously any carpenter can make trays to spec. I got a hefty commission from the manufacturer, he made massive profits and the US Army were happy to pay through the roof for simple equipment. Some serious budgetary overhaul is needed in US Government agencies. Everyone rips off the US Army here, as well as the oil and gas companies. These people have more money than sense.

Answer 3

im a waitress at a family style burger joint. at the end of my shift i am supposed to claim 100% of my tips, which is required by the irs, here in kenucky a waitress is supposed to claim 8% of tips. if you leave a tip on a credit card or debit card we are automatically taxed for that tip. if a waitress dose not claim enough tips in a pay period then theyrecieve a tip adjustment which means that the company they work for has to pay them more money because a waitress only 2.13 an hour and with tips you are supposed to make minimum wage or more. if i wereto get tip adjustments three times in a year before taxes i would be audited by the irs and could possibly be charged with failure to report federal wages.

Answer 4

No, it's true. The government assumes that every table tips you a minimum of 15%, so us servers do get taxed 8% of every check.

Answer 5

Yes it is true. Servers are required to declare AT LEAST 8% of their sales as tips.

Further, servers have to tip support staff (bussers, runners and bartenders). This money, obviously, comes from the server's own tips. So if a server doesn't get tipped that money comes out of their pocket, and therefore, basically just paid to wait on someone.

This on top of the fact servers get paid below minimum wage.

Answer 6

No joke!!
A server will pay the tax on a tip of at least 8% of their sales for the night.
That's before tipping out other staff.
Servers pay tax on tips even if the tip is not recieved, so I guess they pay the IRS for serving you no matter wether you leave a tip or not.
That's why their checks are almost $0.00 .
So always tip your server!!

Answer 7

TIP 15-20% OF YOUR BILL AND EVERYTHING WILL BE GOOD FOR BOTH PARTIES.

Answer 8

In the US it is actually true.

Other countries don't tend to have that very stupid rule though (that's why tipping is so common in the US).