Results 1 to 7 of 7

Thread: Taxes on tips when you're an employee

  1. #1
    God/dess sxybrat07's Avatar
    Joined
    Jan 2006
    Location
    in yer bum
    Posts
    3,827
    Thanks
    0
    Thanked 12 Times in 11 Posts

    Default Taxes on tips when you're an employee

    Ok, I have an issue. Our club pays 2.13 an hour to dancers (required by law) and then claims that we make 3.12 cents an hour or whatever adds up to minimum wage in tips and taxes us on that. I THOUGHT that I was gonna be ok claiming my tips there, as we can enter our tips in our time clock at the end of the night. Problem is, the club doesn't necessarily report what WE reported on our paycheck.

    Example, I claimed approx 600 this pay period in tips, possibly more (have to check records) and my paycheck shows that I claimed 200. My answer from management? "I don't know why you claim them anyway, it's not like you're gonna get audited )

    Lovely. So. What do I need to do at the end of the year to claim my additional earnings, since I can't depend on my club to do it correctly? Since I'm technically an employee, I'm guessing I can't claim independent contractor or anything. Please help!

    (Oh, and I know what my club is doing is illegal, but unfortunately, there's not much I can do about that without getting fired. I just need to find a way to make sure that I'm not doing illegal crap.)
    I believe you Dottie and you have my support

  2. #2
    God/dess VenusGoddess's Avatar
    Joined
    Oct 2003
    Location
    Home
    Posts
    13,598
    Thanks
    0
    Thanked 28 Times in 23 Posts

    Default Re: Taxes on tips when you're an employee

    You can always claim that you have a side job that pays straight cash. Claim it that way. However, the club isn't claiming it because they don't want to pay out too much in taxes.

    The only other way to do it is to put your check information on the taxes and then just add the "additional" tips in. The only down side to doing this is that it will either trip an audit of YOU or of the CLUB and then YOU (and all other dancers that work there).

    You may want to speak with a tax professional...you're stuck between a rock and a hard place.

  3. #3
    Senior Member DanMorris95156's Avatar
    Joined
    Apr 2005
    Location
    San Jose, CA
    Posts
    94
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: Taxes on tips when you're an employee

    The correct answer is to report your actual tips, net of tipouts, on your tax return as additional tip income. Keeps the IRS agents at bay and doesn't come back later in life.

    Just an aside, the IRS has completed a multi-year reorgznization and audit rates are up dramatically because approximately 50k auditors are now available for assignment. Playing audit roulette is a very bad gamble.

    Regards,

    Dan
    Daniel D. Morris, CPA
    [email protected]

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Taxes on tips when you're an employee

    I would also add that the IRS has just received a special congressional money appropriatation to add agents for the specific purpose of investigating / auditing 'sexually oriented businesses' - which under the legal definition also includes strip clubs and exotic dancers. Thus the risks of exotic dancers being audited have never been higher than they will be next year.

    What do I need to do at the end of the year to claim my additional earnings, since I can't depend on my club to do it correctly? Since I'm technically an employee, I'm guessing I can't claim independent contractor or anything. Please help!

    (Oh, and I know what my club is doing is illegal, but unfortunately, there's not much I can do about that without getting fired. I just need to find a way to make sure that I'm not doing illegal crap.)
    The problem is that IRS regs place the onus on the 'employees' and not the 'employer' to correctly report their tip income so that it can be included in weekly employee paychecks. Obviously, the clubs don't want to see any more tip income reported, because the club's workmen's comp premiums, unemployment insurance premiums, employer's share of SSI / medicare tax etc. are all pro-rated based on the amount of 'employee' income they report.

    If an 'employee' dancer reports additional tip income from one job on her 1040 tax return (which makes the total income reported disagree with the W2 issued by the club), rather than reporting the extra money as 'separate' income from independent contractor work, a second job etc. this is highly likely to draw a 'red flag' by IRS computers. The club can claim that it was the 'employee's responsibility to report all of their tip income, thus the discrepancy is the fault of the dancer and not the fault of the club. All in all, this could get both the club and all of the 'employee' dancers working at the club audited if the disparities start piling up. For example, all of the dancers working at this club will all have to submit the same 'employer number' for their W2 income. If IRS computers run a cross-check on the employer number, and find that some dancers have reported additional tip income but that other dancers have not, more 'red flags' will start waving.

    In my non-expert opinion, there is no 100% legal way for a dancer to comply with the IRS code while working in an environment where the club treats her as an 'employee' but the club also refuses to recognize dancer reports of additional tip income. And under the letter of the law, it will be the dancer who is legally at fault if this unreported / incorrectly reported additional tip income is ever discovered by the IRS. Perhaps Dan can shed some more light on the technicalities and risks inherent in this situation. For myself, I simply refuse to work for any club that will treat me as an 'employee'.

  5. #5
    God/dess sxybrat07's Avatar
    Joined
    Jan 2006
    Location
    in yer bum
    Posts
    3,827
    Thanks
    0
    Thanked 12 Times in 11 Posts

    Default Re: Taxes on tips when you're an employee

    So, should I report it as separate income from another job? I've complained to management, and sometimes it's right, and sometimes it's not. They actually encourage us to report our tips in the system, which is odd since obviously they don't check them.

    There is another club ran by the same group, in Nevada that I have worked at. They don't pay the dancers and it's independent contractor status. However, they also don't keep track of the dancers from my club that come down there. Could I claim it came from that club? Or would that be complicated? I haven't worked at that club much, but that club doesn't keep records of who works what nights anyway. ?
    I believe you Dottie and you have my support

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Taxes on tips when you're an employee

    ^^^ nope, that's technically illegal too (reporting additional tip income from your first job as independent contractor income) - it could be construed as fraud ! However, it is less likely to send 'red flags' waving within the IRS computers - it is less likely to prompt an 'employer number' cross-check of the club and other dancers working at the club ...

    Like I said IMHO there isn't any 100% legal way for a dancer to cover her butt with the IRS when the club treats her as an 'employee' but the club also refuses to accept her reports of additional income so they can be run through the club's payroll system with appropriate taxes and fees withheld (on the part of both the dancer and the club) as required by law.

    While it's not 100% legal, since you already DO have independent contractor dancing income from a second club ....

  7. #7
    God/dess sxybrat07's Avatar
    Joined
    Jan 2006
    Location
    in yer bum
    Posts
    3,827
    Thanks
    0
    Thanked 12 Times in 11 Posts

    Default Re: Taxes on tips when you're an employee

    Gotcha. Thanks
    I believe you Dottie and you have my support

Similar Threads

  1. DJ: employee or IC?
    By 1st_samurai in forum Industry Insight
    Replies: 14
    Last Post: 01-21-2010, 12:46 PM
  2. Replies: 6
    Last Post: 05-01-2008, 01:07 PM
  3. should i be ic or employee
    By anomar in forum Dollar Den
    Replies: 6
    Last Post: 01-15-2008, 10:19 PM
  4. filing taxes as employee AND independent contractor?
    By Picaresque in forum Dollar Den
    Replies: 5
    Last Post: 01-19-2007, 10:55 PM
  5. Employee or Independent?
    By shesupsidedown in forum Dollar Den
    Replies: 8
    Last Post: 03-24-2006, 03:56 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •