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Tip or Gift?

Here's an idea that probably deserves some study. Tips are taxable income, but cash gifts are not (unless the gift is over $13,000 in one year). Does this money add to the waiter's taxable income? Does it contribute to her total for the week in making up the difference between her pay from the restaurant and minimum wage? Does it go into the pot to share with the cooks and bussers? Don't bother asking the IRS.

An Internal Revenue Service (IRS) spokesperson conceded that he'd never heard of such a situation and declined to speculate about possible legal implications. He directed ATTN: to the agency's "Tips on Tips" guide, which emphasizes that "income received in the form of tips is taxable."

Since this image has gone viral, we might expect a statement from the agency sometime soon.  


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Newest 4 Comments

It would not matter unless the law was changed. I used to be a waiter and the IRS calculates your tax based on the restaurants income. The tax rate was the same for the people that made a lot or a little. I don’t know if it still set up that way now (it was a long time ago).
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My guess is that the IRS will rule that any money given to a tipped worker at their workplace is a tip, not a gift. Then we'll just have to "cash them outside."
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Very interesting indeed. Maybe the current federal administration can rescind the tips are income statute, and hard working service people can go back to making a decent living.
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