Cat Sci says his friends only claim 10% of their tips in order to pay less taxes. This makes no sense as the employer withholds for for the waitpersons taxes based upon 8% of total sales. In other words the government expects your are getting 8% tips.
Lets say the person had $1000 in sales and and averaged 15% in tips. They would have made $150. If they claimed they only made 10% of that they would claim $15. Their tax withholding is going to be for $80. The government is not going to let them claim $15 in tips, they are going to tax them on $80.
ABE
I see I worded things unclearly in my original post. The employer does not withhold 8% of sales for taxes, but bases withholding on 8% of sales. I hope this clarifies.
Edited by Theodoric, : No reason given.
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