UnderCover Waitress: Tip Credits, Taxes and Pay Stubs, oh, my!

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Saturday, August 24, 2013

Tip Credits, Taxes and Pay Stubs, oh, my!

Ask the Waitress!
What is the actual percentage an employer can claim from my tips for my paycheck? Example: I made $43 last week, and my employer claimed $60 in my paycheck.
When I first read your question, I thought you were asking me about taxes. When I read it again carefully, it sounds like you are asking about claiming tips to the IRS, which is a different question. I am going to attempt to answer both.

Claiming Tips

This answer is short and sweet. If you made $43 in tips, you claim $43 in tips. Not $20, not $60; you claim $43. Your employer does not get to change how much you claim in tips, unless, of course, he wishes to tip you the difference between $43 and $60.

I am going to assume that your employer did not slip you an extra $17. The most likely reason he would want to claim more tips than you made is to avoid paying you his tip credit. For example, let's say you make a tipped minimum wage of $3 per hour, and let's say minimum wage is $7 per hour. If you do not make enough in tips to bring you up to minimum wage every week, then your employer owes you enough money to bring you up to minimum wage.

He may have changed your tip claim to avoid paying you. If this is the case, it qualifies as wage theft and should be reported to the Department of Labor.

Taxes

To answer this question specifically, I need more information. The Tax Policy Center explains that income tax does vary from state to state and the District of Columbia. I don't know where you are.

I am going to assume, for ease of answering, that you are paid or given a pay stub on a weekly basis. (Most establishments pay ever other week. In your question, you said "last week.")

I don't know what your hourly pay rate is; some states require that tipped employees be paid full minimum wage. The other way to say this is some states do not allow employers to take a tip credit.

Taxes are taken out of ALL of your pay; you pay income tax to the feds and to the state, depending upon where you work, on both tips and wages. Therefore, you may have weeks that you owe your employer. Instead of a paycheck and pay stub, you will receive a pay stub indicating that your taxes exceeded your hourly wage. This is much more likely, however, when you have weeks in which make a lot of money. If you made $43 in tips, then this does not add up.

Don't know if there may be an affordable tax professional in your area? You may be able to find somebody knowledgable to take a look at your pay stubs and figure out what is going on, be it legal or illegal. Even an hour's worth of her time may be worth your peace of mind.

Hope that helped.

Thanks for asking the waitress!

4 comments :

  1. Sounds rather underhanded of the employer...

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  2. Yes, it's rather sad that nothing surprises me anymore...

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  3. It would be great if the person who asked this question could report back with what was going on in this case...

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  4. My employer claims 25% of my sales for tips earned, regardless of whether he knows what we have made or not. He used to claim 20% but changed it to 25% this year without making it well known among the staff. Is this common? Is this legal? What benefit does the employer get by claiming a higher percentage for the employee? From everything I have read the employer only needs to claim 8% of receipts each day?

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