This doesnt set well with me, I am wrong?

[Midpack]

Quote:

Originally Posted by Mulligan That was one I never figured out either as far who were the powers to be who increased it from 10% to 15% to 18% to 20%. My dim witted friends response were things have gone up in price.That is when I responded like you did that the corresponding increases in prices would automatically cause the tip to be higher. Of course they never took their knuckles off the ground to count to figure this out until I explained that to them. I am used to it now, so it doesn't really bother me, but the companies forcing workers to share tips to lower the workers salaries does.

That is a fair question, I've wondered too. Although there are state minimums (varying all over the place) evidently the Federal server wage minimum has not increased in 20 years (less often than the general minimum wage) so for a servers total compensation to increase in the past 20 years, the entire increase may have had to come from higher tips, via a higher %. The chart below is conspicuous IMO. Real wages for minimum wage workers have dropped, real wages for servers (not shown on the chart) have dropped even more dramatically in some/many states. I'm not suggesting what's right or wrong, just providing one of the potential reasons server tip % have gone up.

It's also fair to ask, as someone did earlier, why a server should get the same percentage to bring me a $35 entree vs a $6 entree, same amount of work for the server. Where it really gets "interesting" is wine, why should a server get the same % for bringing me a $3000 bottle vs a $30? BTW, many people tip a % of the food bill and a flat $ amount per bottle of wine for this reason. And no, I've never even come close to a $300 wine much less $3000.

[youbet]

Quote:

Originally Posted by ERD50 Plus, not reporting income is illegal. Why do anything to support an illegal activity?

+1. It annoys me when folks "edit" income into unofficial piles of reported and not-reported money. Call me naive, but the youbet household reports every penny and always has.

[target2019]

I can only speak to the circumstances I have first-hand knowledge of. There have been six restaurants in youngun's work record. These range from corner pizza shop to casino 5-star restaurant. For each job the take-home has been very low. The taxes paid on the declared tips comes out of the minimal hourly wage. Each business has a different approach that firstly tries to keep the revenue and labor police at arm's length. Then profit is considered. Lastly an owner or manager looks at what they need to do to keep things staffed.

If you have a problem with someone putting a ten or twenty into the hand of someone's daughter, because you know what is really going on, then we can just disagree. I'll continue to do this.

[MichaelB]

Is unreported tips a real issue? The restaurant must report tips and withhold payroll taxes, and the owners face penalties if caught aiding the effort to evade tips.

[youbet]

Quote:

Originally Posted by MichaelB Is unreported tips a real issue? The restaurant must report tips and withhold payroll taxes, and the owners face penalties if caught aiding the effort to evade tips.

I guess we don't know beyond anecdotal stories of folks employed where a major part of their compensation is tips and they don't report all of it. My own feelings, whether the issue is significant or not, is that when I become aware of someone not reporting income (nanny or other household help, relative employed in the family business and paid under the table, service industry worker not reporting tips, barber or other cash business hiding income, etc., etc.), I don't admire their ingenuity, I think they're jerks.

But's that just me......... a say-do guy.

[MichaelB]

Quote:

Originally Posted by Midpack It's also fair to ask, as someone did earlier, why a server should get the same percentage to bring me a $35 entree vs a $6 entree, same amount of work for the server. Where it really gets "interesting" is wine, why should a server get the same % for bringing me a $3000 bottle vs a $30? BTW, many people tip a % of the food bill and a flat $ amount per bottle of wine for this reason. And no, I've never even come close to a $300 wine much less $3000.

It is easy to contrast the extremes, but as someone who dines out frequently wouldn't you agree the skill level of food service employees is different between the local corner diner and the high end restaurant?

[MichaelB]

Quote:

Originally Posted by youbet I guess we don't know beyond anecdotal stories of folks employed where a major part of their compensation is tips and they don't report all of it. My own feelings, whether the issue is significant or not, is that when I become aware of someone not reporting income (nanny or other household help, relative employed in the family business and paid under the table, service industry worker not reporting tips, barber or other cash business hiding income, etc., etc.), I don't admire their ingenuity, I think they're jerks. But's that just me......... a say-do guy.

No one here saying anything different. I just thought the thread was about tips, not income tax evasion.

[youbet]

Quote:

Originally Posted by MichaelB No one here saying anything different. I just thought the thread was about tips, not income tax evasion.

I'm not an expert and I think you do have credentials in this area, so I'll go with what you say. I just thought that not reporting tip income was income tax evasion. If you say otherwise, so be it.......

[Midpack]

Quote:

Originally Posted by MichaelB It is easy to contrast the extremes, but as someone who dines out frequently wouldn't you agree the skill level of food service employees is different between the local corner diner and the high end restaurant?

Yes I would in general, though with exceptions at both ends - corner diner and high end, as we've all experienced I'm sure.

I was acknowledging an earlier post by another member, as I can understand the thought process. I tip % on everything, except a cap of $10/bottle or so for a bottle of wine - so no additional tip on a bottle of wine over about $50/bottle unless there is something extraordinary about the wine service (it does happen). Right or wrong that's what I usually do...

We don't order wine by the bottle that often any more, even less often expensive bottles - the markup is just brutal on wine (often 2-3X retail).

[MichaelB]

Quote:

Originally Posted by Midpack Yes I would, I was acknowledging an earlier post by another member, as I can understand the thought process. I tip % on everything, except a cap of $10/bottle or so for a bottle of wine - so no additional tip on a bottle of wine over about $50/bottle. Right or wrong that's what I usually do... We don't order wine by the bottle that often any more, even less often expensive bottles - the markup is just brutal on wine (often 2-3X retail).

Got it - missed the earlier reference. BTW, agree with your point on inflation & real minimum wages. As for wine, lots of media reports say wine prices in restaurants are so high because they subsidize keeping food prices lower. Apparently people will pay the higher wine prices but not higher food prices.

[MichaelB]

Quote:

Originally Posted by youbet I'm not an expert and I think you do have credentials in this area, so I'll go with what you say. I just thought that not reporting tip income was income tax evasion. If you say otherwise, so be it.......

We are (and always have been) in complete agreement that not reporting tip income is tax evasion.

[Alan]

Quote:

Originally Posted by MichaelB Is unreported tips a real issue? The restaurant must report tips and withhold payroll taxes, and the owners face penalties if caught aiding the effort to evade tips.

Quote:

Originally Posted by youbet I'm not an expert and I think you do have credentials in this area, so I'll go with what you say. I just thought that not reporting tip income was income tax evasion. If you say otherwise, so be it.......

A couple of years ago I volunteered as a tax aid and prepared many tax returns for folks whose only income was from waiting tables. Let me tell you that although unreported tips are tax evasion, then the folks I saw would have to get a lot of cash tips to earn enough to get to a level where they paid any tax.

From my limited experience I don't see that the loss in taxes from unreported tips to restaurant staff is going be significant in any meaningful way.

However, I do think that young folks hiding tips from the taxman is unnecessary and builds bad habits. (I also believe tax evasion is a bad thing at any level)

[youbet]

Quote:

Originally Posted by MichaelB We are (and always have been) in complete agreement that not reporting tip income is tax evasion.

Oh good! My faith is restored.........

[Mulligan]

Quote:

Originally Posted by Midpack That is a fair question, I've wondered too. Although there are state minimums (varying all over the place) evidently the Federal server wage minimum has not increased in 20 years (less often than the general minimum wage) so for a servers total compensation to increase in the past 20 years, the entire increase may have had to come from higher tips, via a higher %. The chart below is conspicuous IMO. Real wages for minimum wage workers have dropped, real wages for servers (not shown on the chart) have dropped even more dramatically in some/many states. I'm not suggesting what's right or wrong, just providing one of the potential reasons server tip % have gone up. It's also fair to ask, as someone did earlier, why a server should get the same percentage to bring me a $35 entree vs a $6 entree, same amount of work for the server. Where it really gets "interesting" is wine, why should a server get the same % for bringing me a $3000 bottle vs a $30? BTW, many people tip a % of the food bill and a flat $ amount per bottle of wine for this reason. And no, I've never even come close to a $300 wine much less $3000.

That was an informative chart, Midpack. Brutal, I had no idea the federal server wage minimum has not increased while the minimum wage has. So I guess the increased tipping is indeed subsidizing employers salary contributions. You think the government could have thrown those workers a dollar an hour bone somewhere in the past 20 years!

[youbet]

Quote:

Originally Posted by Alan From my limited experience I don't see that the loss in taxes from unreported tips to restaurant staff is going be significant in any meaningful way.

I disagree for the reason you state below.........

Quote:

However, I do think that young folks hiding tips from the taxman is unnecessary and builds bad habits. (I also believe tax evasion is a bad thing at any level)

An act can be significant even if the dollar value is minor.

[target2019]

Tipped wage employee are often required to open and close sections of the restaurant. There are different interpretations of whether the employee should receive minimum wage or tipped wage for the associated time. The corporate-run restaurants tend to follow the letter of the law. Even for training they pay the minimum wage. The mom and pop restaurants seem to make the rules up as they go.

So the server may get a whopping $7.25/hour to clean up the mess and set up for the next day. Or they need to stand for an hour or two (at tipped wage) even though there are no customers. This is likely to happen between 10pm and 2am, for an hour or two.

Something that comes to mind is that we need to walk a mile in their shoes, receive the paycheck, and then evaluate.

[Midpack]

Quote:

Originally Posted by target2019 Something that comes to mind is that we need to walk a mile in their shoes, receive the paycheck, and then evaluate.

I agree, though you might be surprised at the variation in their experiences. In college, I worked at a pizza place for a while. Did OK waiting tables there, and got to take home a free 24" pizza every night I worked (fed 3 of us).

OTOH, I worked one summer at a high end restaurant. 15% was the customary tip then. The restaurant legally paid waiters $1.10/hr. There was no tip sharing required or even suggested by management. I voluntarily paid my busboys about $5.00/hr (we asked for each other), so in essence I net paid the restaurant to work there. Did they take advantage of me?

Maybe I'm a fool, but I made so much more that summer than I ever could have at any wage only summer job, I was thrilled. And I enjoyed the work/camaraderie. I made as much at that restaurant as I made as an Engineer after college for the first several years. That was 40 years ago, and undoubtedly much has changed, but I suspect servers in middle to upper end restaurants still do very, very well (based on my tip alone x number of tables/hour they cover). Let's do a little math.

• Let's say a customer at a Darden restaurant spends $15 between drinks, apps, entree and/or dessert plus taxes. Lots of restaurants average 2-3 times that ($30-45 per person).
• Let's say the average table is a 4-top, so $60 per table. Table turns in an hour on average (Darden).
• Server has 5 tables (could be more, even 10), that's $300/table-hr.
• Let's say 15% tip, even though 18-20% if probably the norm these days. That's $45/hr in tips plus a small minimum hourly wage, $90/hr if they have 10 tables. And 2-3 times that in a high end restaurant.
• Even if they only have 6 hours with tips and spend 2 hrs on setup and cleanup (with no tips). Works out to $34/hr for 5 tables or $68/hr for 10 tables. And again 2-3 times that in a high end restaurant.
• Sounds like a pretty nice gig for a high school grad to me, and it was 40 years ago too.

Tips were far and away the biggest incentive for servers. Like I said earlier, baking tips into food prices would be a huge mistake IMO. Poorer service and I'd bet servers would make considerably less. You think Darden will up servers pay to $34-68/hr?

[Mulligan]

Quote:

Originally Posted by target2019 Tipped wage employee are often required to open and close sections of the restaurant. There are different interpretations of whether the employee should receive minimum wage or tipped wage for the associated time. The corporate-run restaurants tend to follow the letter of the law. Even for training they pay the minimum wage. The mom and pop restaurants seem to make the rules up as they go. So the server may get a whopping $7.25/hour to clean up the mess and set up for the next day. Or they need to stand for an hour or two (at tipped wage) even though there are no customers. This is likely to happen between 10pm and 2am, for an hour or two. Something that comes to mind is that we need to walk a mile in their shoes, receive the paycheck, and then evaluate.

That in essence was my original point. I certainly don't have the answers and definitely not making anything political. But for the good of the country and the tax payers especially higher earning ones who may have a target on their wallet, the race to the bottom, certainly isn't good for anyone. I had no idea that tipped wage scale hadn't budged in 20 years. It gets to my thought about a recent news story that quoted a Pennsylvania government department stating a women with 2 kids making less than $29,000 is better off than making over $60,000 due to the various benefits one gets from government services. At what point will people just say the heck with it. Why bust my hump for scraps when I can do just as good or better not working? I certainly don't think these types of jobs should be paid what professionally trained people get, but those jobs aren't easy either as I sure didn't have working in a restaurant part time on my part time work list. Five years of it during my teen years was plenty!

[audreyh1]

After all these years, we still tip 15% in general, going above that amount for exceptional service. This tends to be calculated on the total after tax (we never buy alcoholic drinks) just for simplicity. Around here, the service level in the nicer, higher priced restaurants tends to be much higher than in an inexpensive mom-and-pop eatery or chain so the tip increase seems appropriate. Nevertheless, where the food is really cheap and the service good we tip proportionally higher (as if the bill were always at least $20).

Since I never bought into the increasing % for waiter's tips idea (and I waited tables many years), I'm glad to know I'm not too old fashioned in my approach - Basic Tips on Tipping: How Much and To Whom?

Remember once when real estate agents were trying to increase the % in their commissions? Hogwash!

[MichaelB]

I don't remember when restaurant tipping was less than 15%. As far as I know 15% is still good. Restaurants add 15%-18% for large groups, and I've only seen restaurants add more in NYC, and then on a very limited scale, so 20% may be written about but not the standard.