Ballpark Taxes

If you have never derived much of your income from tips, you may find this information interesting.

The IRS taxes tips.

How do they do this since there is no way of really knowing how much a person makes?  They just take a guess.

I don't know about you but that just sounds scary.  Having the government guess about how much money they should take from you is a bad idea.

No taxation without quantification!

If you're a food server in Utah where it's legal for them to pay you less than minimum wage and it's a slow night, you are sitting there for the sole purpose of giving the IRS your paycheck.  You're only going to get the tips that you make and it might be 20 bucks for the night. 

Nevada pays minimum wage which still means that you're starving to death unless the restaurant is pulling in steady business.  Nevada is also talking about changing their law to match Utah's since the Federal government is raising minimum wage.

Nice.

For a long time, Blackjack dealers didn't have to pay taxes on their tips.  I don't remember the date but at some point, the IRS figured out that Blackjack dealers were making a living on their tips.

Did they start taxing them?

If your answer was a simple "yes" then I'm sorry but you are not evil enough to be part of the IRS.

The answer is not only did they start taxing them but they also went over years and years of back taxes.  They taxed dealers to the point that many would have to work for decades to get out of debt to the government and quite a few dealers committed suicide rather than even attempt it.  Live free or die.

Here's some information that is especially interesting if you receive tips.  My wife works part time as a food server so this information caught my attention.

Ron Paul is trying to do two things with concern to tips.

First, he is currently trying to get a bill passed that would stop the IRS from taxing tips.  His argument is that people in jobs that derive most of their pay from tips are in low paying jobs and therefore, they should get to keep anything that people are willing to give them.  Quit taxing the people that are struggling to make ends meet.  I would add too that you shouldn't be taxing stuff that's a guess anyway.

Second, he's running for president and if elected (he is actually thinking about what he would do if he were president as opposed to a certain Democratic front runner - I won't mention her name here) he would work to do away with all income tax and the IRS.

His belief is that the government does not own the people of the country and therefore can not just help itself to money in our paycheck.  If we work for it, we should get it.  I like that thought a lot.

I'm going to start spreading this information around my little casino town where just about everyone makes a living from tips.  I think they will find it very interesting.

Don't forget to take my presidential poll.

Comments

[Minimum Wage]

I know a little about this because I have done some tax prep work in the past.

Sometime around, maybe 20 years ago, the IRS adopted a rule taxing unreported tips of employees who customarily receive tips (e.g. servers) by assuming 8 percent of your guest checks is a good enough ballpark estimate of your tips. You can avoid this by bearing the burden of keeping a daily tip log and reporting your tips and thereby paying taxes on a more exact amount. (This is quite a hassle, as you can imagine.)

I used to deliver pizzas, 25 years ago, and drivers do not get taxed the way servers do, since it is not customary to tip the driver. (Sadly true, although I suspect tips are more common today than they were in my day.)

Tips vary wildly, depending on (among other things) where you work (when I delivered expensive upscale pizzas, tips were excellent, when I delivered cheap downscale pizzas, tips were rare and minimal), the season, the weather that day, the day of the week, and the time of day. I don't know how a "one size fits all" formula makes any sense for taxing tips.

No matter what the IRS does, somebody is going to complain. If you don't tax tips, people in minimum wage jobs who don't get tips will complain that they're overtaxed relative to those who receive (untaxed) tips. If you do tax tips, you're either imposing a substantial record-keeping burden or making unfounded ballpark assumptions.

[CV Rick]

Ah, mr. minimum wage, you have restated a major problem in this country - people complaining. They aren't complaining that they're being hurt by taxes, they're complaining that the guy next to them isn't being hurt enough. Now what kind of sense is that? Cancer patients expend effort through treatment to get better, they don't attempt to figure out a way to give healthy people cancer.

Think about it.

[mark]

and here I thought you were going to talk about the taxes on ballparks...

[Success Warrior]

Min,

I have seen that crabtrap thinking in all areas of life. When I was a cop, the city used to give us a little longevity bonus every Christmas to be nice. They put a cap on how much they would pay, someone complained that he wasn't getting paid for all of his years, and we all lost the money.

People still paying taxes should either switch jobs or work to get the taxes reduced or eliminated for their own pay.

Mark, when I talk about money and ballparks, I'm going to talk about the price of beer.

[Minimum Wage]

I've heard an awful lot of conservatives complain that the poor don't pay enough taxes. Ever listen to Rush Limbaugh?

[CV Rick]

I don't listen to idiots and imbeciles, Minimum Wage.

[Success Warrior]

The poor pay too much in taxes. If they paid less, they would be less poor.