- Waiters must account for all of their tips, including cash tips.waiter setting table in restaurant image by Stephen Orsillo from Fotolia.com
Waiters are responsible for accurately reporting the amount of money that they earn in tips. So, keeping accurate records is important, especially since the IRS has been known to scrutinize tipped employees. According to the IRS, a tip is any amount of money that a customer gives to the waiter beyond the cost of the meal. All tips are subject to tax withholding except when the total tips for any one month from any single job are less than $20. Waiters must claim the entire amount of tips received, including cash tips, but only the part of the tips the waiter individually retains when in a tip-splitting or tip-pooling environment. A waiter's taxes are based on his hourly wage plus tips. - Keep track of how much money you earn in tips. Ask your employer for IRS publication 1244 which provides a year's supply of Form 4070, Employee's Report of Tips to Employer. Fill out one Form 4070 each day you earn tips and submit the forms to your employer by the 10th of each month. Keep copies of these records or input the information daily into a spreadsheet. The employer should use this information to provide you an accurate tip-out report showing your tax withholding for that pay period. If your records indicate that you may owe taxes to the government, set money aside or have additional taxes taken out each pay period to compensate for tips.
- Deductions for waiters can include anything from dry-cleaning service for uniforms, shoes, aprons, ties (if required), pens and pencils, for example, if the employer does not provide them. Keep your receipts for these items together in a safe place. You must retain all receipts for deductions in case you are ever audited.
- Allocated tips are tips added to your income by your employer over the tips that you reported. These tips are reported in Box 8 of your W-2 Form. Taxes are not withheld on allocated tips. If your employer indicates that your allocated tips are more than your reported tips, use your daily log to report tips. For additional unreported tips, fill out Form 4137. Your tips will probably be audited by the IRS. Keep all your tip logs along with your tax return to prove your income. If your allocated tips are lower than the total from your logs, then you need to speak to your employer. His records may be incorrect, and you need to obtain a new W-2. If your reported tips match your allocated tips, then your employer probably reported your tips in the incorrect location. Speak with your employer and figure out if this was put in Box 8 as opposed to Box 7. Ask for a corrected W-2.
