The following is a guest post by a co-author of the iMark Blog, Dee.
Particularly interesting for me was Chapter five, titled Paupery. I will admit, at first I found the conversation in this chapter contrived and stilted, especially compared with the rest of the book which seems to flow so easily. This might have been because the rest of the book was more of a narrative whereas this chapter was almost entirely dialogue. But then again what do I know about writing? Not as much as I know about money, I will say that much. This brings me to why I enjoyed this chapter so much! The subject of this chapter is finances and money…well, sort of.
Dublanica utilizes this chapter to opine that waiting tables is akin to gambling. Waiters can make next to nothing in any given night or they can make half of their month’s rent. These ups and downs can be addicting, claims Dublanica. On top of that, Dublanica explains how waiting on the rich can take its toll on a waiter’s wallet. The susceptibility to gain an appreciation for expensive foods and wine is ever present. Another issue that waiters face, one that I find particularly intriguing, is tipping.
Most tips are given cash in hand. It is up to the waiter to be honest and, come tax time, declare these tips as part of their income. Tips that are not given in cash have a paper trail so the honour system does not come into play. The full amount from tips that are doled out via credit or debit need to be declared. In either case, it is very rare that a waiter is allowed to keep 100% of his or her tips. Often, a portion is given to the host or hostess, dishwashers, etc. This means that wait staff must pay taxes on money that they are not even earning!
So here is how Dublanica was able to avoid this problem. His employer had all employees enter tip amounts in a ledger and then surrender them to management at the end of the shift. This is opposed to taking the tips home every night. The tips were then divvied up as previously agreed and then doled out with the pay cheque every week. This way the wait staff only had to pay the taxes on the actual amount awarded.
This is how some restaurants deal with tax issues. Do you know of any other method? If so, please leave a comment.
I am looking forward to reading Dublanica’s next book, Keep the Change. In this book Dublanica has travelled across the US to interview people who rely on tips. Obviously tipping is a subject that interests most small business accountants very much.