Will we be charged for swiping credit?

[Anonymous]

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@AppHappyTog

Typically that 3-6% restaruants have servers pay is for tip out to bar and table cleaning staff. Atleast that's how it worked in all the restaurants I worked in as a bartender.

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I'm not referring to tip outs; they are completely different than a "tip processing fee" which is what many restaurants are moving to.  Tip outs are funds passed from one employee to another.  A tip processing fee is the business passing the cost of allowing a tip on a credit card on to the employee.  Most restaurants will disclose this up front to the employee at the time of hiring and it's usually handled via the POS system, so it's not something they actually see.  If the server makes $200 in tips on a shift, $100 of which are cash and $100 of which are on credit cards, they'd net $197 at the end of the shift, because $3 (3%) would be taken from their credit card tips. 

Hopefully that makes sense.

[Anonymous]

I am guessing that the biggest practical penalty to servers in customers tipping with credit cards is that the management includes that as money that will eventually be reported to the IRS, and thus the server will have to pay social security tax and federal and state income tax on it.  Cash tips are (I am guessing) only reported if the server decides to do so, which I imagine most do not (hard for me to blame them given how little money they make).

That's all guesswork on my part -- maybe BBS or the other folks discussing this will know better.

[Anonymous]

I tell my tipped employees that they're supposed to claim everything they make (in cash) by law.  I'm doing my part by telling them to do so.  Realistically, most don't.  The POS system is fully aware of what they've made in credit card tips, so upon clocking out when they are prompted to input their tips the minimum they can enter is what their credit card tips were.  I do have some different tip percentage audits set up though to flag those that are claiming far too little.  Servers typically make 15%-20% in tips as a bare minimum on their sales.  I'd say CC tips constitute roughly half of their tips on average, so by claiming just CC tips they're likely claiming around 8%-10%.

In the event of an official IRS audit, if they see that a tipped employee over a length of time has only been claiming a single-digit percentage of tips relative to their sales, it can only mean one of two things, both of which point the finger at me, their employer.  One, they aren't being truthful about what they're claiming and I should be enforcing that better.  Two, they are a horrible server, as they're providing sub-par service if they're only getting tipped a single-digit amount regularly, so I should have replaced them long ago.

From the reports I run, I tend to just verify that they're claiming > 10% overall.  I've found that to be sufficient enough to not raise any significant red flags.  When I see someone claiming less than that, I simply reiterate the fact that they're supposed to "claim 100% of their cash tips..." and I find that the problem is fixed over the course of their next several shifts, weeks, months... until it's a problem again and another reminder needs to be given.

I think the money that servers make is likely impacted quite a bit by the area of the country they are in, the type of restaurant, etc.  I'm in NY, so they make $7.50/hr which is 2X-3X more per hour than some states down south paying $2-$3-something per hour.  My servers typically clear around $20-$30/hr in tips, so with their hourly wage that's $27.50-$37.50/hr.  For a full-time server working 35-40 hours per week, they're easily taking home more than managers working 50-60 hours per week.

[Anonymous]

I worked at a place that automatically claimed the minimum (8% of sales) for you. You had to request to claim more, for example if you wanted to buy or refinance a home and needed to prove income, because the owner didn’t want to ay the increased social security taxes.