The Complete Guide to Tips & Gratuities A Guide for Employees Who Earn Tips & Employers Who Manage Tipped Employees and Their Accountants
()
About this ebook
There are millions of workers in the USA that rely on tips for most of their income, and there are well over two million businesses where the employers rely on tipped employees. According to recent statistics from the U.S. Department of Labor, food and beverage service-related workers held 6.5 million jobs. The U.S. Department of Labor estimates in a recent study that tips and gratuities may account for well over $5 billion per year being left on plates and tip trays, financed on credit cards and handed directly into happy, open palms.
But let’s face facts. Relying on customers’ tips for your income is tough. The average customer just doesn’t realize how difficult and hard the average waiter, waitress, hair dresser, concierge, cab driver, maître d', or bartender works for their money. Dealing with and satisfying the general public is one of the most demanding jobs around. Many, if not most, tipped employees have a tough time making ends meet. And then there are the complicated IRS tax laws regarding tipping and gratuities that most employees and few employers know how to handle correctly.
For the first time this new book deals with all aspects of tips and gratuities. For the employee or self-employed, learn how to earn more tips and how to properly account for and pay taxes on them. For the employer: how to manage and properly account for the taxes on tipped employees; for the bookkeeper and accountant: get the latest on tax and withholding laws. Apart from all great and practical advice in the book, it has to be remembered that tips have to be earned, thus there are literally hundreds of little tricks, hints and suggestions to help tipped employees – well, make more tips!
Read more from Sharon Fullen
Opening a Restaurant or Other Food Business Starter Kit: How to Prepare a Restaurant Business Plan & Feasibility Study Rating: 4 out of 5 stars4/5How to Write a Great Business Plan for Your Small Business in 60 Minutes or Less Rating: 5 out of 5 stars5/5How to Get the Financing for Your New Small Business: Innovative Solutions from the Experts Who Do It Every Day Rating: 0 out of 5 stars0 ratingsThe Food Service Professional Guide to Controlling Restaurant & Food Service Labor Costs Rating: 4 out of 5 stars4/5How to Open a Financially Successful Bed & Breakfast or Small Hotel Rating: 0 out of 5 stars0 ratingsHow to Open a Financially Successful Specialty Retail & Gourmet Foods Shop Rating: 0 out of 5 stars0 ratingsHow to Open & Operate a Financially Successful Specialty Retail & Gourmet Foods Shop Rating: 0 out of 5 stars0 ratings
Related to The Complete Guide to Tips & Gratuities A Guide for Employees Who Earn Tips & Employers Who Manage Tipped Employees and Their Accountants
Related ebooks
The Food Service Professionals Guide To: Buying & Selling a Restaurant Business: For Maximum Profit Rating: 0 out of 5 stars0 ratingsExpediter & Food Runner: How To Be An Outstanding ..., #3 Rating: 0 out of 5 stars0 ratingsLyft 'Em Up: The Lyft Driver's Bible Rating: 0 out of 5 stars0 ratingsFloor Manager Rating: 0 out of 5 stars0 ratingsFind the Best POS System for Your Restaurant in 3 Easy Steps Rating: 0 out of 5 stars0 ratingsThe Food Service Professionals Guide To: Successful Catering: Managing the Catering Operation for Maximum Profit Rating: 0 out of 5 stars0 ratingsHow to Start-Up a Food Truck Business Rating: 0 out of 5 stars0 ratingsWhy Some People Should Come With Warning Labels Rating: 0 out of 5 stars0 ratingsRestaurant Management Systems A Complete Guide - 2019 Edition Rating: 0 out of 5 stars0 ratingsHome-Based Business Ideas and Opportunities: A Step-By-Step Tips to Start Up A Successful Home-Based Business Rating: 0 out of 5 stars0 ratingsFrom Service to Experience: The Guest Perspective Paradigm Rating: 0 out of 5 stars0 ratingsHow to Start a Restaurant on a Budget Rating: 3 out of 5 stars3/5How to Start a Catering Business Rating: 0 out of 5 stars0 ratingsThe Food Service Professional Guide to Controlling Liquor, Wine & Beverage Costs Rating: 0 out of 5 stars0 ratingsOpen Restaurants That Flourish: A Restauranteurs' Guide to Opening New Sites and Building a Leading Brand Rating: 0 out of 5 stars0 ratingsKey West & The Florida Keys - The Delaplaine 2021 Long Weekend Guide Rating: 0 out of 5 stars0 ratingsDropshipping: Full Guide & How To Make A Business Step By Step Rating: 0 out of 5 stars0 ratingsA Guidebook on Staffing for Bars, Nightclubs and Strip Clubs Rating: 0 out of 5 stars0 ratingsHow To Be a Cocktail Waitress and Make Big Tips. Simple Money-Making Strategies for the New Cocktail Waitress Rating: 0 out of 5 stars0 ratingsRestaurant and More: Step-By-Step Startup Guide Rating: 0 out of 5 stars0 ratingsThe Complete Guide to Buying a Restaurant: Practical Advice to Get It Right Rating: 0 out of 5 stars0 ratingsGuess Who's Eating Your Profits...: The Manager's Essential Guide to Restaurant and Bar Loss Prevention and Investigations Rating: 0 out of 5 stars0 ratingsHomeWork Rating: 0 out of 5 stars0 ratingsHow To Be a Waitress and Make Big Tips. Get a Top Server's Secrets to Maximizing Your Tip Earning Potential Rating: 0 out of 5 stars0 ratingsUNLEASHED: Tapping Into Your Feminine Instinct to Create Financial Independence Rating: 0 out of 5 stars0 ratingsComplete Steps to a First Online Business Modern Entrepreneurs 3rd Edition Rating: 0 out of 5 stars0 ratingsHow to Make Money and Bigger Tips as a Waitress Rating: 3 out of 5 stars3/5
Industries For You
YouTube Secrets: The Ultimate Guide to Growing Your Following and Making Money as a Video I Rating: 5 out of 5 stars5/5YouTube 101: The Ultimate Guide to Start a Successful YouTube channel Rating: 5 out of 5 stars5/5Fast Food Nation: The Dark Side of the All-American Meal Rating: 0 out of 5 stars0 ratingsBottle of Lies: The Inside Story of the Generic Drug Boom Rating: 4 out of 5 stars4/5INSPIRED: How to Create Tech Products Customers Love Rating: 5 out of 5 stars5/5Energy: A Beginner's Guide Rating: 4 out of 5 stars4/5Sleight of Mouth: The Magic of Conversational Belief Change Rating: 5 out of 5 stars5/5Powerhouse: The Untold Story of Hollywood's Creative Artists Agency Rating: 4 out of 5 stars4/5Music Law: How to Run Your Band's Business Rating: 0 out of 5 stars0 ratingsShopify For Dummies Rating: 0 out of 5 stars0 ratingsThe Market Gardener: A Successful Grower's Handbook for Small-Scale Organic Farming Rating: 4 out of 5 stars4/5Artpreneur: The Step-by-Step Guide to Making a Sustainable Living From Your Creativity Rating: 2 out of 5 stars2/5Disney's Land: Walt Disney and the Invention of the Amusement Park That Changed the World Rating: 4 out of 5 stars4/5Weird Things Customers Say in Bookstores Rating: 5 out of 5 stars5/5Excellence Wins: A No-Nonsense Guide to Becoming the Best in a World of Compromise Rating: 5 out of 5 stars5/5Audition for Your Career, Not the Job: Mastering the On-camera Audition Rating: 5 out of 5 stars5/5A Study of the Federal Reserve and its Secrets Rating: 4 out of 5 stars4/5Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients Rating: 4 out of 5 stars4/5Uncanny Valley: A Memoir Rating: 4 out of 5 stars4/5The Best American Food Writing 2018 Rating: 4 out of 5 stars4/5The Best Story Wins: How to Leverage Hollywood Storytelling in Business & Beyond Rating: 5 out of 5 stars5/5Pharma: Greed, Lies, and the Poisoning of America Rating: 5 out of 5 stars5/5All the Beauty in the World: The Metropolitan Museum of Art and Me Rating: 4 out of 5 stars4/5How We Do Harm: A Doctor Breaks Ranks About Being Sick in America Rating: 4 out of 5 stars4/5
Reviews for The Complete Guide to Tips & Gratuities A Guide for Employees Who Earn Tips & Employers Who Manage Tipped Employees and Their Accountants
0 ratings0 reviews
Book preview
The Complete Guide to Tips & Gratuities A Guide for Employees Who Earn Tips & Employers Who Manage Tipped Employees and Their Accountants - Sharon Fullen
The Complete
Guide to Tips
& Gratuities:
A Guide for Employees Who Earn
Tips & Employers Who Manage Tipped
Employees and Their Accountants
Sharon Fullen
The Complete Guide to Tips & Gratuities: A Guide for Employees Who Earn Tips & Employers Who Manage Tipped Employees and Their Accountants Atlantic Publishing Group, Inc. Copyright © 2004
1210 SW 23rd Place • Ocala, Florida 34474
800-541-1336
352-622-5836–Fax
www.atlantic-pub.com–Web
sales@atlantic-pub.com–E-mail
SAN Number :268-1250
All rights reserved. No patent liability is assumed with respect to the use of information contained herein. Although every precau-tion has been taken in the preparation of this book, the publisher and author assume no responsibility for errors or omissions. No warranty is implied. The information is provided on an as is
basis.
International Standard Book Number: 0-910627-38-X
Library of Congress Cataloging-in-Publication Data Fullen, Sharon L.
The complete guide to tips & gratuities : a guide for employees who earn tips & employers who manage tipped employees and their accountants / Sharon Fullen.
p. cm.
Includes index.
ISBN 0-910627-38-X (alk. paper)
1. Tipping. 2. Tipping--United States. I. Title: Complete guide to tips and gratuities. II. Title.
HD4928.T5F85 2004
331.2'166--dc22
2004013993
Printed in the United States
Table of Contents
Introduction Who Should Read This Book ........................................7
Chapter 1
What Is a Tip?
Tips Are Wages..................................................11
Tips Are Controversial ....................................12
Chapter 2
To Insure Promptitude—The History of Tipping Your Guests Must Pay ....................................16
Tipping in America ..........................................17
Non-Tippers, Beware ......................................17
Sharing the Wealth ..........................................18
The Anti-Tipping Movement..........................19
Tipping in the 21st Century ............................20
Chapter 3
The Why of Tipping
Why Do People Tip? ........................................21
What? No Tip? ..................................................23
Why Some People Don’t Tip ..........................24
Tipping in Other Cultures ..............................26
Chapter 4
Tip Etiquette
Giving Tips ........................................................29
Who Should Be Tipped?..................................30
People Are Confused ......................................30
When You Are on the Receiving End............31
Tip Jars ..............................................................33
Educating Customers ......................................35
3
Chapter 5
How to Increase Your Tips
Percentage or Sales ..........................................37
Why Do Some People Earn Better Tips? ......38
Look in the Mirror First ..................................39
Little Tips for Bigger Tips................................39
Do Your Own Research ..................................44
Teamwork = Better Tips ..................................48
Salesmanship ....................................................49
Chapter 6
Become a Commission Salesperson
Be Prepared ......................................................51
Be Proactive ......................................................52
Be Service-Oriented..........................................53
Be a Salesperson ..............................................54
Be Professional..................................................55
Suggestive Selling ............................................56
Dazzle Them with Your People Skills ..........60
Pride in Your Job ..............................................60
Chapter 7
What Employers Can Do to Boost Service and Tips Increased Sales ..................................................61
Improved Customer Service ..........................62
Decreased Employee Turnover ......................62
Measured Performance....................................63
Be Proactive ......................................................63
Tip-Sharing ........................................................67
4
Chapter 8
Reporting Your Tips to the IRS
Definitions ........................................................69
When You Must Report Your Tips ................71
Daily Recordkeeping........................................72
Reimbursed Expenses......................................74
Deductible Expenses ........................................75
Monthly Reporting ..........................................77
Looking at Your W-2 ........................................78
Allocated Tips ..................................................79
Tip-Sharing ........................................................80
Confused So Far?..............................................81
IRS Tip Programs..............................................86
Reporting Tips on Your Tax Return ..............88
Claiming Gifts ..................................................89
Filing Your Tax Return ....................................90
Saving Your Records ........................................90
The Cost of Not Having Records ..................91
The Risks You Take ..........................................91
Tip Audits ..........................................................91
Tips and the Self-Employed............................91
Chapter 9
Why Should I Report My Tips?
Tips Are Income................................................94
Taxes and No Income ......................................94
Paying Penalties................................................95
Other Financial Penalties ................................96
You May Be Short-Changing Yourself ..........98
You Could Lose Your Job ................................98
5
Chapter 10
Employers and Tips
Definitions ........................................................99
Rules for Large
Food and Beverage
Businesses....................................................101
IRS-Compliance Programs ............................103
Self-Regulation................................................108
Encouraging, Supporting and Requiring
Compliance ................................................109
Legislation and Court Rulings......................113
FICA Tax Credit ..............................................114
Your Payroll Accounting Needs ..................115
Chapter 11
Wage Laws and Tip Regulations
Minimum Wages ............................................117
Overtime for Tipped Employees ..................119
Tip Pools ..........................................................122
Employment Rights and Obligations..........124
Chapter 12
Resources
Books ................................................................127
Customer Service and Sales..........................127
Internal Revenue Service ..............................127
Publications ....................................................127
Forms................................................................128
Tax Topics ........................................................129
Legal ................................................................129
Payroll Software..............................................129
Minimum Wages ............................................129
Restaurant Industry ......................................135
Pizza Delivery ................................................136
6
I n t r o d u c t i o n
i
When you pocket your tip change or deposit it into your checking account, have you ever stopped to think you are participating in a multi-billion-dollar international economic system? Perhaps no other financial transaction is as commonplace or as confusing. Tipping is a paradox for the giver and the receiver—a voluntary transaction that has become compulsory and expected; a gift that is measured and taxed; an informal custom governed by formal government regulations; an interaction based on social guilt
and an economic necessity; and a routine act filled with confusion and necessity.
Tipping is a social puzzle for the giver.
• How much tip do I leave?
• Who should be tipped?
• Why should I tip?
Service employees and employers also struggle with questions like:
• Why should I pay taxes on a gift?
• Why should tips reduce my employer’s responsibility to pay a fair
wage?
• Why should I care how much tips my employees make?
7
The Complete Guide to Tips & Gratuities This book will help demystify the history, psychology and economics behind tipping so you can understand why this is such a hot topic for politicians, businesspeople and service personnel. You’ll learn about tipping attitudes, how to increase your tips, and why you should report your tip income. Separate chapters will address wage and tip-income laws that affect tip-earning employees and how employers can comply.
I’d encourage you to read the boring
chapters of this book to learn the whys behind earning tips. Our goal in detailing the story and science of tipping is to provide valuable information to make tip-earners more productive and employers more proactive.
Who Should Read This Book
Anyone who regularly receives tips for services rendered:
• Waiter/Waitress
• Cocktail server
• Bartender
• Bus person
• Maitre d’
• Wine steward
• Coatroom attendant
• Valet parking attendant
• Manicurist
• Hairdresser
• Barber
• Shampooer
• Massage therapist
• Gardener
• Custodian
• Repair person
• Pet groomer
• Dog walker, pet sitter
• Musician
• Barista
• Bellmen
• Door attendant
• Room service waiter/waitress • Porters (train, ship)
• Cabin steward
• Bath steward
• Skycap
• Delivery person
• Drivers (cab, limo, etc.)
• Tour guide
8
Tips on Tipping
• Sleeping car attendant
• Mover
• Baby-sitter
• Cleaning person
• Mail carrier
• Garbage collector
• Usher
• Maid
• Concierge
• Casino dealer
• Keno runners
• Drink server
• Clowns
• Catering server
• Shoe shiner
• Caddy
• Trainer
• Locker room attendant
• Restroom attendant
• Parking attendant
• Grocery bagger
• And more…
• Tow truck operator
Anyone who hires and/or supervises tip earners and owners and managers of:
• Hotels and motels
• Spas and resorts
• Restaurants and bars
• Hair salons, barbershops and nail salons
• Home and garden maintenance and cleaning services May you discover the key to serving your customers with pride and reap the rewards daily.
9
The Complete Guide to Tips & Gratuities
Tip: A small sum of money given to someone
for performing a service; a gratuity.
10
C h a p t e r
1
What Is a Tip?
The dictionary defines a tip as a gift of money for a service, specifically an amount above what is owed. Also know as a gratuity.
But that hardly covers the true definition of a tip which encompasses:
1. A loosely regulated multi-billion-dollar economy.1
2. An economic necessity for millions of service industry employees worldwide.
3. A practice based on historical customs, social norms, class status and psychological distress.
Tips Are Wages
Tips, like your hourly wage, are taxable income. The Internal Revenue Service and the federal court system have spent countless hours instituting tip laws and rulings that target tip-earners and the employers who hire them. The IRS estimates that approximately $500 million in tips go unreported annually.2 In Chapter 8— Reporting Your Tips to the IRS and Chapter 10—
Employers and Tips, we’ll discuss various tax rules and regulations that tip earners and employers should understand.
11
The Complete Guide to Tips & Gratuities Tips Are Controversial
Although anti-tipping laws are no longer on the books, many people would like to do away with tipping entirely. Attitudes toward tipping range from that’s just the way it is
to the Tipping is Stupid anti-tipping Web site.
Why not just pay everyone equitably and forget tipping? This question arises periodically when government entities review minimum wage or living wage
laws. Politicians, business leaders and economists cannot agree on what would be fair for employers, employees and their