Taxes Take Chunk of Bartender's Hefty Tip

http://articles.news.aol.com/ ^ | 9 7 06 | associated press

[MarkL]

I wonder if it's the first time she's paid taxes on her tips...

Believe me, you always pay taxes on tips. You might be able to get away with paying taxes on less than you actually made, but you still have to pay taxes. There's a federal law that the restaurant has to keep track of your sales as a waiter or waitress (I don't recall if they have to do it for bartenders), and at the end of the night, you have to declare at least a minimum percentage of your sales as tips. There had been nights where I hadn't made that much in tips, but I was still taxed om more than I made. I usually just declared the difference between what I had left over after my payout, minus what I had when I started my shift (we had to start out with enough to be able to make change).

Mark

[Cobra64]

The withholding is based on a rate schedule. That's why I do not like annual bonuses. If your base salary is 50k and you get a 25k bonus, they withhold at the 75k bracket.

[Cobra64]

And then the damned congress taxes "moving" as taxable income since the military usually does the moving.

It depends on how the it's reported.

[Freedom4US]

Excellent point - tho it would be nice if gestures such as this were somehow beyond the purview of the government taxation i.e. gift-tips. For that matter, why aren't prices just listed with taxes figured in? (If one really wants to get in trouble, start paying workers their full wage and have them count out the cash back in various state, local and federal taxes. It may actually be illegal to do this, not sure on that.)

[pigdog]

Absolutely right. And it clearly shows:

It's time for the FairTax!!!

[pigdog]

And actually, it would be LESS THAN the 23% tax inclusive rate (which is the maximum marginal FairTax rate which NO ONE ever pays ... it's not possible).

Her actual cost would be the price of the Jeep (reduced by the removal of the income tax) plus that price times her effective FairTax rate - which is almost always much lower than her effective income tax rate was.

The untaxed price of the Jeep could easily drop from $25,000 under the income tax to, say, $22,500 under the FairTax.

Note that under the income tax she would have to have earned (at an effective income tax rate of, say, 9.76%) $27,704 for her "$25,000 Jeep". Under the FairTax she'd pay the $22,500 price plus the FairTax 23% ti but that cost would be reduced by the $5,290 prebate under the FairTax. Even if she financed some part of the purchase, the interest on her loan should be a couple of points lower than under the income tax as well compared to the rate under the income tax.