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Sep 26, 2011 11:23 PM

Is tipping in cash better for the server?

My father (from NZ where tipping is *NOT* the norm) is insistent on leaving the tip in cash when on holiday in N Am so that it can't be pocketed by management (he usually pays by credit card). But he'll leave a smaller tip in cash if he doesn't have the correct change on him. I think it's probably better to give the full (15-20%) tip on the credit card. I want to know - does anyone have any experience that would back him (or me) up?

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  1. I know as a bartender in college the only tips I declared to the government were credit card tips, I never declared cash :P Thats really the only advantage of getting cash.

    12 Replies
    1. re: twyst

      'cept I think the IRS now estimates your taxable tip income based as a % based on the tabs posted to your station/table (how they determine that beats the heck out of me), so if you're going to leave a standard to low tip, then charge it, if you want to go above and beyond the 20% range then do cash if you have it on you.

      1. re: hill food

        The IRS estimate is only something like 8%. Credit card tips almost always amount to at least 8% of your sales, so its usually not an issue. If for some reason you make less than 8% of your tips in credit card sales youdo have to declare a little of your cash.

        1. re: twyst

          ok I'm sorta cool with that, it at least allows space for the server's tip-out and the inevitable table of stiffs.

          1. re: twyst

            Actually the IRS takes the average of what you receive in credit card tips and assumes that you received the same amount on the cash tips, which sucks because if someone leaves you 10% in cash but you get an 18% average in credit they will assume you made 18%. Legally, you are supposed to declare the total amount that you make, and this is how they determine what should be declared. At least that's my understanding from the suit that Fior d'Italia was in a couple of years ago.

        2. re: twyst

          Yeah, because tax fraud is cool and stuff.

          1. re: jgg13

            Oh give it a rest, cash tips account for a TINY fraction of a servers income in a nice establishment. (like 5-10 percent) You are living in a dream world if you think the majority of people that receive cash tips declare EVERYTHING. I worked a lot of places though my undergrad and graduate school degrees and never met a single person who declared every cent, and working in the bar I was responsible for most of their checkouts so I know what people were making vs claiming.

            Id be willing to bet most of the people who are complaining about this dont declare everyting either. Ever made a bet for $20 on a sporting event and won? Did that make it onto your tax return? Ever had someone pay you in cash for doing them a small favor? Did that make your tax return? Ever been given a gift certificate for doing a good job at work? That needs to be on your tax return too, or else you are committing "tax fraud"

            1. re: twyst

              My brother worked for Pier 39 in SF. He said the average table tip at one of the pier owned restaurants was $20. The head waiter would work 3 months, and take a cruise, . So some waiters really do make good money off tips. This was back in the 80's. I believe they estimated $3,000 a month in tips.

              1. re: BIGGUNDOCTOR

                Not saying they don't, I;m just saying the overwhelming majority of it comes in the form of credit card tips. An average night behind the bar at an upscale restaurant would bring in about $300 for me a decade ago, but $275 of it would be on credit cards.

            2. re: jgg13

              tax-wise I was concerned the server is assessed tax on an estimated 15% of sales which would mean they are paying the tax on the tip-out to the BOH and bar and that's not fair (BOH and bar does deserve a consideration). plus it wouldn't allow for the bad luck run of crotches that believes 10% is just fine, some poor sap would get seated 3 nights in a row.

              1. re: hill food

                Sometimes you get tons of foreigners, get almost nothing, and pay taxes on money you never earned. Its a broken system.

                1. re: twyst

                  agreed, but as you know there are plenty of threads addressing that and as a US-type citizen knowing what I can figure out ( I say to ex-pats and visitors - yes it confuses us as well) a simpler system would be preferred.

              2. re: jgg13


                Let me sum this up...

                Not only do we have to pay our tabs at the restaurant AND a damn near mandatory 20% tip, but we ALSO get to pay servers' part in taxes and such because they choose to defraud the federal and state governments!
                Did I miss anything, like buying their groceries and paying their rent because they are on welfare because of the lack of income because of the tips they're NOT reporting??

            3. Some restaurants wait til the end of the week to dole out the tips from the credit cards rather than daily.

              19 Replies
              1. re: Linda VH

                This is the reason I tend to leave cash, in addition to the cc charges, though I leave the same amount as I would leave on a credit card. I find it bothersome that there are those who would use it to cheat the system and lie on their taxes. I know it probably happens but I don't want to make it more convenient for those who do.

                1. re: Linda VH

                  Why should I help servers evade paying their fair share of taxes by leaving them cash, especially if I am leaving a generous tip?

                  And why whould I care that the server must wait until the end of the week to receive cc tips? We who don't live on tips are paid every other week or even once monthly.

                  1. re: Leonardo

                    "We who don't live on tips are paid every other week or even once monthly."

                    Yes, because you don't live on tips. I can't think of a server/hairdresser/cabdriver in the US who would put up with being paid monthly.

                    The two situations have nothing to do with each other.

                    1. re: Steve

                      I agree with Leonardo. Do people who live on tips pay their rent/mortgage, phone bill, utilities bill, credit card bill, student loans et cetera on a daily basis or monthly like the rest of us?

                      1. re: babette feasts

                        There is no one right way for money to change hands. It depends on the custom of the trade.

                        The relationship between you and your employer/clients has nothing to do with your relationship with the restaurant or server any more than your relationship with the utility company. They are separate transactions.

                        If you are asking everyone to align their practices, then why don't you suggest restaurants in the US pay their waiters on a monthly basis like the mortgage?

                        1. re: Steve

                          I'm not asking anyone to do anything, just saying that everyone has the same basic categories and schedule of where the money they make goes, or at least all the servers I work with seem to. If you make $500 a week, what difference does it make if you get it all on Friday or $100 at a time? Most people in all professions would find getting paid once a month frustrating because they would have to budget much more carefully to make sure it lasted to the end of the month. Getting paid more frequently does make it easier (and I actually have worked for a company that paid us monthly). I don't know how the bi-weekly/semi-monthly pay schedule evolved in the US, but it seems to work for most people. Aside from custom, are there unique needs of servers, taxi drivers, and stylists such that they need X amount of cash on a daily basis and don't pay bills or manage money the way the rest of us do? The back of the house gets paid every two weeks, how are their needs different from the front of the house? I don't understand.

                          1. re: babette feasts

                            I was once in a place that paid monthly - god it killed me, it was six weeks before the first paycheck was going to arrive. it was a good job but if I hadn't begged accounting for an advance I wouldn't have been able to get to work, much less eat. so yeah a little cash in hand would have been nice.

                            1. re: babette feasts

                              i worked for fifteen years on a contract that paid me monthly. Where I work now I get paid weekly. There is no point in discussing all this, because it has zero to do with the question of the OP.

                              If I tip in cash, they get the money immediately. I am not saying I know for sure they prefer this. I'd like to hear more from servers about what they think of the subject of this thread.

                              How often I get paid is irrelevant.

                              1. re: Steve

                                My understanding is that you buy your coke, weed and party drugs with your cash tips and pay your rent and bills with your wage and credit card tips.

                                So were they "let me pitch in for your eight ball" good or just "let me help pay off your student loan" good? that's the question. i bet most people would prefer an eight ball today rather than student loan money paid out weekly.

                                1. re: Steve

                                  I work at a restaurant that holds our credit card tips to apply to our pay checks. With that, they also deduct the credit card transaction fees from those tips. I guarantee 75% of the dining out community does not realize this. We who are tipped employees work these types of jobs for that sole reason, not to cheat on our taxes. I work daytime at a bank, so the restaurant, the tips, was my spending money for myself and my two sons, or course until my employer changed the procedures regarding credit cards.
                                  Needless to say, I will be finding a different restaurant to work for.

                                  1. re: EricaLane

                                    Is your issue with your employer:

                                    1.They put it on your paycheck so the 2-3% fee is removed from your tip?

                                    2. They do not let you take your tips untaxed ?

                                    My thought is on the first, why should your employer pay your portion of the fee when the money goes to you.
                                    On the second you say you do not want to cheat on your taxes, but is that what you want ?

                            2. re: babette feasts

                              When your paycheck starts varying to a wide degree from one paycheck to the other as it is with server's tips, I think you'd be more inclined to want to be paid right away.

                              Much easier to budget when you have a fixed amount coming at regular intervals.

                          2. re: Leonardo

                            "And why whould I care that the server must wait until the end of the week to receive cc tips? We who don't live on tips are paid every other week or even once monthly."

                            A lot of people take jobs waiting tables in chain restaurants and the like because they need cash in hand on a daily basis. Many are living paycheck to paycheck and find an amount of cash in hand at the end of the day a blessing. I'm talking about students, single moms, etc. At least that was my experience when I waited tables.

                            1. re: Leonardo

                              I'm thinking that if you leave them a generous tip, they won't care if its in cash, credit, paid immediately, or wait a bit; a good tip is a good tip.
                              However "generous" is somewhat subjective.
                              I also think "their fair share of taxes" is also subjective. For many in the service industry, a lot of things are not fair, including perhaps, the tax structure.
                              "Well if they don't like it, tell them to get a good ecucation and do something with their lives"...well sometimes it ain't that easy or simple.

                              You certainly don't HAVE to care, though.

                              1. re: porker

                                " For many in the service industry, a lot of things are not fair, including perhaps, the tax structure."

                                Why is the tax structure not fair to people in the service industry? Is it worst for them than for teachers, firefighters, others? I'm a strong believer that teachers should make more but I don't think it's right for them to cheat on their taxes either.

                                1. re: chowser

                                  " For many in the service industry, a lot of things are not fair, including perhaps, the tax structure."

                                  2 things: I say "For many" meaning not all and I say "perhaps" meaning it may or may not be fair.
                                  You take a single mother of three trying to eak out a living on waitressing pay and tips. Sure the system is supposed to take into account the income bracket, dependants, etc etc. However, it many times does not reflect reality or "fairness". Compare this to teachers, firefighters, and others - is it comparing apples to apples? Sometimes yes, sometimes no. Sure you sometimes have the single parent of 3 firefighter, or whatever, but not all circumstances are equal - not everyone fits in one category or another.

                                  I think its mostly unfair taxation which drives people to lie/cheat/steal. I live in Quebec (highest taxes in NA) where income tax generally runs over 50%, sales tax runs 15%, and "sin" taxes are through the roof. This has spawned a very large underground economy

                                  Is it "right" to cheat on their taxes?
                                  In some instances, I say yes.

                                  1. re: porker

                                    Taxation would be a lot fairer here in Quebec if it were not for the culture of encouraging people to work under the table. We have a health care system to pay for, and it's really unfair that for every dollar I make I have to contribute to the system where as anyone working for tips or for themselves can basically declare whatever they want on their tax return and screw the rest of us. People who don't pay taxes do get sick and they get services just like the rest of us. In fact, if someone has a family of 4 (2 adults + 2 kids) and they declare an income of 30k, their after tax pay is 40k. So, this person can hide income and end up making even more money from the government as a result.

                                    1. re: hala

                                      It's not just health insurance--it's everything that the government pays for, roads, schools, parks, etc. People who cheat and use the system are usurping what others pay.

                              2. re: Leonardo

                                As a patron of a restaurant, you should care a little bit how the server gets paid. If you want good service, you need a good server.

                                Most restaurants only pay minimum wage, there's rarely health insurance, no sick days without a note from the ER, and all of the other common complaints there are about being a server. The upside to the job is a flexible schedule and cash in hand at the end of the night. Good servers only stick around good places to work. That affects the patron's experience.

                            2. l wouldn't want my tips discounted when someone leave cash. If l read it right he might leave a 10% tip, reduced from an already low end 15% when cash. No as a server l would be insulted.

                              Sure cash is better, no CC charges to the server, but not discounted.

                              1. If I have cash I tip in cash, partly because it reduces the amount I am borrowing. I suspect it is better for the server, though I'd prefer to hear the response of servers.

                                I find it strange to leave a reduced tip if you are worried about management pocketing some of the tip. That is like pre-pocketing the tip for yourself. If management then insists the servers hand in their tips, you have just screwed up your whole strategy.

                                1. I waited tables for about 10 years. Cash v. credit card never was a factor at any of the places I worked, because, as hill food points out, we tip out and get taxed based on sales.