Waiting tables seems like a straightforward job—that is, until you’ve spend an hour or two on the floor during a weekend dinner rush. Every table is like a different galaxy, full of questions and special requests, people needing refills, extra condiments, napkins… And, much of a server’s compensation often comes in the form of tips—yet another thing that seems straightforward until you really stop to think about it. Not only are the tips given by customers wildly unpredictable, but they are also subject to taxes, just like an hourly income. Therefore, it is important for servers to develop a system that keeps a reliable record of tips received.
It is a good idea to:
- Maintain a daily record of tips received.
- Note all tips: cash, those from “tip-sharing” arrangements, and credit card tips. You may want to differentiate among the types of tips in your records.
- Update your records after every shift to ensure accuracy. Make it a part of your end-of-shift routine, if possible.
- Record the name(s) of the other recipient(s) along with the dollar amount in all tip-sharing situations.
You are required to report your tips to your employer in writing within 10 days of the end of the month in which the tips were received. Your employer will use this information to calculate your withholdings. Remember: you must calculate your own Social Security and Medicare taxes for tips that aren’t reported to your employer (for tips that total more than $20 in a month).
The IRS may charge a penalty for unreported tips, so it is imperative to stay on top of this information. Keeping track of your tips should not take more than a few minutes at the tail end of every shift. Do yourself a favor, and take the time to jot down your tip totals!