Claiming 'tips' during tax time?

[TorqueDog]

Originally Posted by Iginla

How the hell does anyone know if he's being cheap? Money guy wasn't speculating, he said it in an absolute. That's just rubbish. The guy could really just be anal about servers not paying taxes on tips.

I thought you were initially being a smart-ass.

The fact that you're actually following through as though you were seriously trying to make a point just makes me think you're trying too hard. It also doesn't matter what the reason is, unless the service was atrocious, that's a dick move.

[Rathji]

He likely assumed that the person wasn't a complete mindless idiot, because that's the only reason someone would withhold a tip based on that reasoning.

[AR_Six]

Some people just don't tip. That's one thing. Actually going to the server and going "I'm not tipping you because you're probably a tax cheat", that deserves a kick in the junk.

[rd_aaron]

In reality, they didn't tip her because she didn't bring them 5 sides of ranch dressing.

[socktape]

Originally Posted by Kiran403

I worked as a server all through college and some of the servers claimed their tips and some claimed none. The ones that claimed none usually ended up getting audited or re-asssessed at some point. The servers who claimed their tips only claimed a portion of them (say 10-25% of their gross wages) and never had any issues with CCRA. I think the government realizes that nobody is going to claim all their tips but at least if you make an effort and claim something somewhat reasonable, they usually won't make an issue of it...at least from my personal experience.

You have to be careful with this these days. If Revenue Canada really wants to nail you they can as all they have to do is go to your employer and ask to see what you did in sales for the year. Todays ordering/billing systems keep track of what each server "sold" for the year and then they can take an arbitrary percentage of that, no matter what you actually got tipped.

Say you claimed no tips for 2011 they go to Moxies and ask them for your receipts. You sold a 100,000 in drinks and meals for 2011... well average tip is 15% and you have to tip out a third of that. That means you were tipped approx $10,000 in tips you should be claiming. Then they bill you for the tax on that 10 grand plus interest.

[bizaro86]

Originally Posted by socktape

You have to be careful with this these days. If Revenue Canada really wants to nail you they can as all they have to do is go to your employer and ask to see what you did in sales for the year. Todays ordering/billing systems keep track of what each server "sold" for the year and then they can take an arbitrary percentage of that, no matter what you actually got tipped.

Say you claimed no tips for 2011 they go to Moxies and ask them for your receipts. You sold a 100,000 in drinks and meals for 2011... well average tip is 15% and you have to tip out a third of that. That means you were tipped approx $10,000 in tips you should be claiming. Then they bill you for the tax on that 10 grand plus interest.

Would they actually use 15%? That's kind of the "standard" number that people throw around, but I bet the actual average is lower than that because of the minority who don't tip anything or tip very little.

I'd actually be quite curious to hear what servers average, if anyone had a source and/or anecdote.

[Locke]

The official rules are that servers have to claim 100% of their tips. Lets be realistic, most servers dont even know how much they earn in tips because the majority of them dont keep track.

Originally Posted by socktape

You have to be careful with this these days. If Revenue Canada really wants to nail you they can as all they have to do is go to your employer and ask to see what you did in sales for the year. Todays ordering/billing systems keep track of what each server "sold" for the year and then they can take an arbitrary percentage of that, no matter what you actually got tipped.

Say you claimed no tips for 2011 they go to Moxies and ask them for your receipts. You sold a 100,000 in drinks and meals for 2011... well average tip is 15% and you have to tip out a third of that. That means you were tipped approx $10,000 in tips you should be claiming. Then they bill you for the tax on that 10 grand plus interest.

This is almost CRA's process for generating a server's taxable tips.

What they actually do is determine how much a server was tipped out by all credit cards as these are easily tracked. So, taking your numbers if a server was tipped $10,000 over the course of a year on credit cards that would be added to their income and taxed.

What they dont tell you is that CRA also have the authority to quadruple that number to account for cash tips as well as a penalty. So, in scenarios like this the penalty isnt a percentage per se, its a multiple of the deemed avoided amount.

I've seen it. It isnt pretty.

[Buff]

I remember a few years ago I heard that a lot of the people in the service industry were being audited. They were going after people whom they felt didn't claim enough tips, or even claim any tips at all.

[albertGQ]

I serve part time on weekends. I won't say whether I claim my tips on my taxes or not (I don't at all if you're wondering), but no one I work with claims as much as they make. They either claim $0 or a small percentage of their wage like 10%. When they probably make 200% of their wage at a minimum

[Travis Munroe]

Unless the CRA is bored I believe they have bigger fish to fry. Im not saying whether I believe they should or shouldnt be honest about it however I cant see the CRA getting anal over a student making 20k a year while she goes to school.

I did hear a story (not sure on its validity) that a few members of a notable club went and bought some nice vehicles in cash after working stampede. Now the CRA has a record of someone buying a nice car but claims very little each year..

[socktape]

Originally Posted by albertGQ

I serve part time on weekends. I won't say whether I claim my tips on my taxes or not (I don't at all if you're wondering), but no one I work with claims as much as they make. They either claim $0 or a small percentage of their wage like 10%. When they probably make 200% of their wage at a minimum

well, not that I would advocate it, but I wouldn't be declaring nothing. They can go back 7 years on your taxes... Then plus interest. It can get really nasty. I think that they'd be less likely to audit you if you are at least declaring something.

The RC auditors are like a dog with a bone when they start and they want the whole skeleton. The good ones take it pretty personally that you're cheating the government.

And yes, there was a big focus on it a few years ago. Just the same as buying and selling stuff on Ebay, etc.

[socktape]

Originally Posted by Realtor 1

Unless the CRA is bored I believe they have bigger fish to fry. Im not saying whether I believe they should or shouldnt be honest about it however I cant see the CRA getting anal over a student making 20k a year while she goes to school.

I did hear a story (not sure on its validity) that a few members of a notable club went and bought some nice vehicles in cash after working stampede. Now the CRA has a record of someone buying a nice car but claims very little each year..

Cars, homes, vacations... you name it. When the girls were pulling a grand or more per day. Guys too.

[Locke]

Originally Posted by albertGQ

I serve part time on weekends. I won't say whether I claim my tips on my taxes or not (I don't at all if you're wondering), but no one I work with claims as much as they make. They either claim $0 or a small percentage of their wage like 10%. When they probably make 200% of their wage at a minimum

This is why CRA gave themselves the authority to charge people 400% of their credit card tips.

I understand not wanting to claim tips, but if you get caught they will string you up.

[bizaro86]

Originally Posted by Locke

This is why CRA gave themselves the authority to charge people 400% of their credit card tips.

I understand not wanting to claim tips, but if you get caught they will string you up.

Which seems crazy high. I would think way more han 25% of restaurant patrons pay by credit card.

[albertGQ]

Originally Posted by bizaro86

Which seems crazy high. I would think way more han 25% of restaurant patrons pay by credit card.

More than half of my tips are from CC tips no question.

[Flames Draft Watcher]

My accountant tells me that you have to (or maybe should) claim at least 20% of your income as tips if you're a server.

From working in the industry I'd say most servers do not claim 100% of their tips. Seems like the gov't somewhat compensates for this by keeping the minimum wage for serving liquor lower than the minimum wage for every other job.

I don't really have problem with either tactic I guess.

[GP_Matt]

Originally Posted by Flames Draft Watcher

My accountant tells me that you have to (or maybe should) claim at least 20% of your income as tips if you're a server.

From working in the industry I'd say most servers do not claim 100% of their tips. Seems like the gov't somewhat compensates for this by keeping the minimum wage for serving liquor lower than the minimum wage for every other job.

I don't really have problem with either tactic I guess.

I don't really follow the logic. Are you saying the government punishes servers with a lower minimum salary because they cheat on their taxes?

[Flames Draft Watcher]

Originally Posted by GP_Matt

I don't really follow the logic. Are you saying the government punishes servers with a lower minimum salary because they cheat on their taxes?

Yep. Seemed an obvious connection to me. Why else would alcohol servers make less than every other single job out there?

I haven't seen if they ever released any official rationale for the disparity in minimum wage.

[Locke]

Originally Posted by GP_Matt

I don't really follow the logic. Are you saying the government punishes servers with a lower minimum salary because they cheat on their taxes?

Its a rational argument. Why else would you have two separate minimum wages, one for the general working public and one for Liquor Servers?

I imagine because the government is factoring in unclaimed tips and so they earn a lower wage.

Minimum wage will increase from $9.40 per hour to $9.75 per hour. The provincial government made the announcement Thursday, saying the change will affect about 26,000 Albertans.

The changes to minimum change are slated to take effect September 1. Liquor server minimum wage of $9.05 will not change.

http://www.cbc.ca/news/canada/edmont...e-alberta.html

[Bean]

Originally Posted by Realtor 1

I did hear a story (not sure on its validity) that a few members of a notable club went and bought some nice vehicles in cash after working stampede. Now the CRA has a record of someone buying a nice car but claims very little each year..

My coworker's kid tried to get financing for a home and got shut down as the papertrail of earnings showed far less than what he pulled in.

Same thing happens if a server hurts themself at work and they try to prove their employment earnings for WCB. Can't prove anything if you don't have proof, despite popular belief and common sense.