
Originally Posted by
phonehome
There is a basic IRS rule that says that is you earned money from someone they want to know who that someone was, if you paid money to someone they want to know who that someone was.
This is how this effects deducting tipouts, The "legal way" to do it, at least as far as the IRS is concerned is to document the payments by issueing a 1099 to each person involved. It is not good enough to just add it all up into a simple single line item and say "tipouts" or some other name and says it's X thousand dollarsand not state who (VIA 1099) you paid it to, much in the same way that if you want to deduct alimony paid, which you can, you must state who you paid it to, including SSAN. Then they will go looking for that person to claim it.
Not simply "alimony" X thousand dollars.
Now the problem comes from this, to issue a 1099 to all those people you are tipping, you have to know there real name, first and last, also there SSAN, Is that the case? John the DJ Tim the bouncer, and Marie the waitress or whatever, is that there real name? Do you know there SSAN's? Because all these people most likely don't want to claim all or maybe any of that cash you and all the other girls have been paying them, they probably are not going to want to give you this information.
If you try to do it any other way the IRS view is that what you were giving all these unnamed people were simply "gifts" "voluntary gifts" that you can't deduct.
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