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Thread: Taxes for Server/Waitress

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    Default Taxes for Server/Waitress

    hello,
    I am going to start serving next week. I know that credit card tips are taxed but cash is obviously not. I will be depositing money in my bank account & need to know how much of it should be set aside for taxes. What percent is taxed of tips? I do not want to do taxes next year to see I owe x amount of money and have no money set aside for it. Plus I was thinking I could possibly just have x amount with-held. If you have any other advice or info please let me know. Thank you in advance.

  2. #2
    d4rk4ngel
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    Default Re: Taxes for Server/Waitress

    I've waitressed before and I claimed both all my cc tips and about 80% of my cash tips and I've never had to pay taxes when I file my return, I've always been owed money.

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    Default Re: Taxes for Server/Waitress

    by the letter of the law, 100% of tip income must be reported to the IRS and is subject to taxation. Depending on whether you are being treated as an independent contractor, as a 'tipped minimum wage' employee etc. you may or may not be required to turn your weekly tip income over to your 'employer' so that it can be run through the 'employer's payroll system with weekly payroll tax withholding.

    If you are an independent contractor, then the club is going to put out a 1099 report of miscellaneous income to both you and the IRS at the end of the year. However, you are still responsible for reporting your 'net' income (= 1099 reported income plus tip income minus legitimate business expense tax deductions) on a quarterly basis ... as well as being responsible for cutting a check to the IRS and your state tax agency (assuming your state levees an income tax) on a quarterly basis. The next estimated tax deadline is June 15th, which covers earnings from April and May.

    At the very least, your tax rate will include the 15.3% Social Security and Medicare tax for 'self-employed' independent contractors. Beyond that, a de-facto federal income tax rate of somewhere between 5% and 30% will also apply - with the rate being dependent on the total amount of money you are earning (as well as your marital status, number of dependents, and a whole bunch of other personal info). And beyond that, if your state levees an income tax you will also need to make estimated tax payments to the state tax agency. State income tax rates can range from essentially zero to more than 10% depending on what state you live in and now much money your are earning.

    As discussed in other threads, it is actually a very good idea NOT to co-mingle your independent contractor business income money with your personal money on an ongoing basis. Opening a separate 'business' account into which you will deposit your business earnings, and then transferring money out of that 'business' account into your personal account as needed, will help immensely with the IRS if and when you are ever audited.

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    Default Re: Taxes for Server/Waitress

    O my I am so confussed. I can figure out if I need to turn over all tips and about the 1099 next week. But if I am responsible for filing how much should I save from the tips. As I said I do not want to be scrambling for money before tax time.

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    Default Re: Taxes for Server/Waitress

    Also I have another job. Could I just have a percentage extra put towards taxes in lue of the tax on the tips.

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    God/dess Zofia's Avatar
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    Default Re: Taxes for Server/Waitress

    Quote Originally Posted by Harleylynn View Post
    O my I am so confussed. I can figure out if I need to turn over all tips and about the 1099 next week. But if I am responsible for filing how much should I save from the tips. As I said I do not want to be scrambling for money before tax time.
    The general rule of thumb is 30 to 35 percent to withold. However, you can do an estimated return to narrow that down somewhat.

    Also I have another job. Could I just have a percentage extra put towards taxes in lue of the tax on the tips.
    That works too. Just have them withold enough to cover about 30 to 35 percent of your waitressing income. Still it is best to put all your waitressing money in a separate bank account reserved for business and business only.

    HTH
    Z

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    Default Re: Taxes for Server/Waitress

    Thank you very much Zofia & Melonie.

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    Default Re: Taxes for Server/Waitress

    ^^^ also something else to consider is that your income tax rate that will apply to both your 'straight job' and to your independent contractor income is based on the total of both incomes. Thus the amount of taxes being withheld from your weekly paychecks by your 'straight job' employer is probably NOT going to cover the higher tax rate (i.e. your employer uses tax tables based on what you earn from ONLY that job).

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    Default Re: Taxes for Server/Waitress

    ^ That depends though, doesn't it? I know that when i filled out my W-2, one of the forms that I filled out asked me if I had more than one job, and if so, did I want to be taxed at a higher bracket.

    That might just have been state taxes though; I don't remember filling that out anywhere but Georgia. But my memory's pretty shot.

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    God/dess Deogol's Avatar
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    Default Re: Taxes for Server/Waitress

    The red tape in the US is getting just way way to complicated. (And with the focus on more regulation by this administration - I am sure it will get even more crazy.)

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    Default Re: Taxes for Server/Waitress

    Yes. Remember Tax Simplification and Reform Act under Reagan? What a crock!
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: Taxes for Server/Waitress

    Do I have to file independent contractor since the job is not under the table? I get a paycheck that gets taxed. Isn't there somewhere just to claim tips?

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    Default Re: Taxes for Server/Waitress

    ^^^ technically speaking, if you receive a paycheck and a W2 then you CAN'T file as an independent contractor based on tip earnings from the very same business. You can file the standard tax form which includes a line for tip earnings not reported through your employer's payroll system. However, be aware that if the amount of tip earnings equals or exceeds the amount of income reported by your employer on your W2, it will wave a red flag at the IRS.

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    Default Re: Taxes for Server/Waitress

    Now I am confussed and I hope I word this right. How can you put a tip for what they are not reporting and it not be over what they report you make? Obviously they are not reporting ANY of my tips( I really just wish they would) and as of right now I haven't made anything(you can not make tips first three nights serving). My first real day is tomorrow. So how am I supposed to claim my tips?

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    Default Re: Taxes for Server/Waitress

    Also I am going to thread jack my own thread. I am a receptionist at a massage clinic. I work a set schedule every week of only 14 hours a week. I only make about $236 bi-weekly(CRAPPY! I know). They are not taking out frederal taxes but are taking out all other taxes. I called and they said that since I do not make at least $700 every two weeks they do not take it out because I will not need to pay out federal, since I do not make enough. Evidently it is something new this year. That since they will have to refund it they don't take it out. Is this right?

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    Default Re: Taxes for Server/Waitress

    So how am I supposed to claim my tips?
    This is the essence of the 'rock and a hard place' scenario for 'employee' dancers working in clubs that bend the tax law in their favor. You are SUPPOSED to report your tip income to the club's payroll system. The club is SUPPOSED to accept your tip dollars, run them through the club's payroll system with appropriate taxes withheld, and pay whatever's left back to you in your (weekly) paycheck. At the same time the club is SUPPOSED to pay unemployment and workers comp insurance payments in proportion to your reported income, which is supposed to include base pay plus actual tips.

    From a technical standpoint, if a 'statutory employee' fails to report their tip income to their 'employer', it is the EMPLOYEE who is at fault. If and when your club is audited you can be sure that this point will be used by the club in their own defense.

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    Default Re: Taxes for Server/Waitress

    So now here is the question what am I supposed to do with my tips then? Also can anyone answer my other question above?

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    Default Re: Taxes for Server/Waitress

    ^^^ well, you can be like many other dancers working at the same club and simply 'forget' to report your tip earnings the same way that the club did. Or you can 'fraudulently' report your tip earnings at the club which treats you as a 'statutory employee' as if they were Schedule C independent contractor business income from an independent source (which of course they are not). Or you can include your tip income on the 1040 line for unreported tip income and expect to be audited if the amount of unreported tip income equals or exceeds the amoung of W2 income reported by the club.

    As to the club's withholding claim, this obviously shows that the club expects dancers not to report their tip incomes at all. The $700 bi-weekly assumption is that 26 * $700 = $18,200 in 'official' annual income reported to the IRS will indeed fall below the tax bracket threshold where income taxes will actually need to be paid.

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    Default Re: Taxes for Server/Waitress

    Again thank you mellonie! I actually think I am done serving at the club the money sucks because they have 12 servers on a night. It is a tiny whole in the wall club where only one would be nesscary. Also the place in my second question is a massage clinic and is a non tipped position. I only make $236 bi-weekly. They take out state, medicare, city, social-security just not federal.
    Last edited by Harleylynn; 05-09-2009 at 03:57 PM. Reason: non tipped position not non tax...i am stuck on stupid today.

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