It's worth noting that there's a document on the IRS Web site
directed at the people receiving the tips and telling them how
to report them. It includes a discussion of tip-outs. See
http://www.irs.gov/pub/irs-pdf/p1875.pdf.

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Dick Adams wrote:

- quote -

Great question. These are known as tip-outs and are one of
the reasons that anyone who gets tips should keep detailed
records. A wait person is not allowed any deduction for
tip-outs nor can they change the amount of allocated tips
for tip-outs. If you look at Form 4070A (used to report tips
to an employer) there is a column for tip-outs. In this case
the tips reported on the W-2 would already reflect that
certain amounts were paid out. In the cases where tips are
not being reported, then the wait person must use the
allocated amount on the W-2 unless they have actual logs
that can prove they received a lower amount of tips. The
logs would have to include the amount of tip-outs. The log
is supposed to include the names of those individuals who
are sharing the tip-outs. (Note, I have never shared the
experience of someone who was audited on the issue of
tip-outs, so I do not know how the IRS treats someone whose
log does not include the names.)

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Dick Adams" <rdadams[at]smart.net> wrote:

- quote -

If she's been properly reporting to her employer as required,
she just takes the box 1 number from her W-2 and puts it on
line 7 of the 1040.

What she should be reporting to her employer is the amount
she gets and keeps both from and after tip sharing.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Dick Adams <rdadams[at]smart.net> writes:

- quote -

Seems to me that the 10% she gives to the fund was never her
money to begin with -- it was tips for the busboys. They need
to report it as tip income, and as for her, it's as if she
never received it.

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A waitress gives 10% of her tips to those bussing her tables.
Busboys/girls are high turnover employment and she has no
records of who, when, and how much. On most shifts she and
others contribute to a fund which is divided equally amongst
the bussing personnel.

How does she account for this on her tax return?

Someone else asked me to post this.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << Just tell the IRS auditor you read it on the Internet. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >