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Always Tip With Cash

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Whenever possible and convenient, I try to tip with cash. When you tip with a credit card, there is an electronic paper record of the amount you tipped for service. When it comes time to report earnings at the end of the year, all of that tip is counted towards the earnings of that individual. When you tip with cash, there is no such paper trail and it is the individual’s own responsibility to declare how much they’ve earned in tips.

Ask any waiter or waitress about how they treat tips and, if they’re honest, you’ll get one response – they don’t report all their tips. When you’re making a piddly $2 per hour in salary and live off tips, you’ll find that cash “disappears.” (though it would be impossible to prove this) But honestly, these individuals work their butts off for a small payoff and they can would appreciate all the help they can get. So, if you’re the type that tips big because you understand how hard it is to be a server, hook them up by using cash – it’ll invisibly bump your tip percentage up a few points.

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52 Responses to “Always Tip With Cash”

  1. dePriest says:

    I used to make $1.10 an hour waiting tables, so I empathize with servers. I’ve been telling my husband to tip cash for years, and we will dig for cash for a tip. If we don’t have enough cash for a decent tip, we give as much cash as we have then put the rest of the tip on the card. The only time we put the total tip on a card is when we have no cash.

  2. mbhunter says:

    I usually do not tip cash separately from my credit card charge. Unless I have some “funny money” like Sacajaweas or half dollars. Then I’ll tip with cash.

  3. Tom says:

    Jim, I don’t think it’s “ethically wrong to do something that is inherently legal but could lead to illegal acts by another person.” You’re not responsible for the other persons actions; however you’re suggesting taking actions for the sole purpose of enabling another person to commit illegal acts. I would definitely consider that immoral.

  4. NC says:

    I always tip with cash, for this very reason. A Consumption Tax instead of an Income Tax would negate this whole discussion.

  5. Bryan says:

    As a bartender I appreciate the cash tip……it makes up for those that run a $1200 bar tab and then leave NOTHING…you call it tax evasion I call it commerce…you ever barter a service with someone I’ll mow your yard if you cut down my tree? You claim that on your taxes? One of you should since it wouldnt be a complete wash someone came away making out better on that type of deal.

    Maybe the answer is to add a VAT or something similar like they do in Europe that way everytime you come in regardless of how I treat you I still get my 18% gratuity? Any takers?
    I am not going to disagree that the tax system (among many others in this country) is BROKEN but until we get some non-professional politicians in office nothing is going to change

  6. I always try and tip in cash, but often am not carrying any. I use credit cards for 90+% of my purchases.

    As far as the tax evasion argument goes… eh. There is plenty of commerce going on that the government isn’t collecting taxes on. Why do you think there is a steady pressure to do away with cash? ;)

  7. 2 million says:

    Wow – Jim, your under the gun on this one . I always pay by bill + tip with a credit card. Mostly for the rewards and convenience of tracking my expense in my pf software.

    After reading all this I don’t think Im going to change my ways.

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  9. Denise says:

    When I used to wait tables — ages ago — the only time a cash tip was better than a CC tip was if it was above the flat percentage of sales that my employer reported to the IRS. All tip revenue was reported as % of the bill. I think it was something like 8%, I don’t remember exactly. CC tips may have been reported as actual, but I’m not even sure that was the case. So if I was averaging less 8% or whatever (and it only took a few jerks to lower this average), I was getting screwed by the IRS. Someone’s due a break here. (I still tip on my CC for convenience, though.) I think it really depends on the sophistication and accuracy of the sales system and the server’s own bookkeeping system. Anyway…

  10. Walter says:

    Business owners usually leave everything on a CC because dining out is – in certain situations – a tax deductible ‘expense’ and the charge slip conveniently provides the needed documentation.

    Interested in frugality?

    Individual income earners pay tax on ALL income before it can be spent. Corporations pay taxes only on what’s left after it’s been spent.

    I’m not saying it’s fair, but it’s lawful and that’s the way it works. Everyone (on this post!)should have a corporation, or at least a Sole Proprietorship of some type.

    Good luck to all -

    Walter

  11. denon says:

    You know, there’s a lot I could say, but it looks like everyone else has said it for me already. Generally I figure you to be pretty level headed, but this time I’ve got to assume maybe you were trolling for some extra traffic? Surely you don’t actually think that this “real world” is so broken, that we might as well step outside the boundaries?

    I do appreciate the “tip” to tip with credit cards from now on, though.. :) Besides, with credit cards, you know the guy at the next table isn’t going to walk off with it before the wait staff gets back..

  12. Matt (different one) says:

    If they can get away with paying less in taxes, great for them. If I can help them do it without risking a prison sentence of my own, I consider that a moral obligation. Too bad it’s way harder for most people.

  13. denon says:

    Matt: “if they can get away with”?. C’mon, you could probably stuff your pockets full of stuff at Walmart and “get away with it” .. but as a result, I’ll need to pay more for my stuff next time I’m in there. Should I encourage you to try and “get away with it”?

  14. Matt says:

    There’s a major difference there, though. Wal-Mart paid for that stuff. Until I pay them for it, it still belongs to them, and for me to sneak it out of the store would be stealing, and stealing is wrong.

    The government did not earn the tip…the waitress did. The waitress is the one doing the work. And the fact that the armed men who’ll come after her if she gets caught not paying them enough protection money are called “auditors” instead of “extortionists” doesn’t change the fundamental nature of what they do for a living, nor does it change the moral imperative to resist them whenever practicable.

    Note to folks who know who I am: _I_ don’t cheat on my taxes. I paid accountants and lawyers a whole lot of money to make sure it was _legal_ for me to pay as little as I do. But waitresses don’t have the kind of financial resources it takes to do that.

  15. denon says:

    I suppose this is a never-ending discussion, but I’d say the government has already paid for the roads, utilities, etc that you enjoy every day. They simply ask you to reimburse them based on the amount you can afford, by summing up your total income, tips and all. If you can afford to pay lawyers and accountants to find the loophopes, then you can save some cash, but I think that’s the exception, not the rule.

    -d

  16. EdCrab! says:

    Tiping with a CC:
    Pros – The server gets their tip – Usually at the end of the night.
    It goes to your rewards/airline miles/refund/bonus total.
    Cons with CC: It reduces your available balance for more important things.

    Pros for Cash –
    They get their money – usually. In larger restraunts, with many servers on the floor, it’s easy to “Pick up” someone elses table, esp during breaks, or shift change.
    Cons –
    They may, or may not get their tip if they’re leaving work – Then again, if their head’s out the door, your service will probably stink.
    Cash is great – but it usually gets reported on the back end anyway
    (As a busboy at Sams Town for over a year, I got to have the office talk – everyone heads into the office, and “tells” our managers how much we make, once a year, And even for the graveyard shift, all the servers WILL try to pair down how much they “REALLY” make.)

    All in all, TIPS stands for:
    To
    Insure
    Prompt
    SERVICE.

    If you didn’t get it, don’t leave it. As much as we’d appriciate it, it’s better to be held accountable for our service. Yo to Scott at Sam’s Town ;)
    Go Drift!
    EC

  17. Fake Name says:

    If your rich uncle gives you a $12K gift, it’s totally tax exempt

    If you don’t have a rich uncle and instead 1,200 people each give you $10 then it’s taxable.

    Explain how that’s fair?

  18. jim says:

    Well, if they gave you $10 as a gift, then none of that is taxable. If they gave you $10 for service, then it’s income and it’s taxable.

  19. Jared says:

    As both a taxpayer and former waiter I have this to add…
    Waiters don’t “choose” their job as some people in this thread have suggested, but rather we take a job because we have to. Not many people decide they want to serve a bunch of ungrateful demeaning jerkwads for a living. Don’t get me wrong there are a lot of genuine nice people out there, but they seem to pale in comparative numbers to the former.
    Now then, how is it that the government can take my tip money? You go to work, you get a paycheck, and they take their cut out of it in taxes. You take whats left and decide I did a great job serving you, so you leave me some of that Post-Tax money. Guess what, they want to RE-TAX that same money.That does not seem fair to me. Right now in my current profession I lose 30% of my pay each week to taxes, then I take my POST-TAX dollar, or .70 cents as it were, and buy a bagel for lets just say that same amount. Of that sale, the government gets another 8.75% (NY) of that, so another .06 cents. Then the Bagel man has to pay them another 15-30% of that (depending on how good his account is) where does it end?
    Im all for taxes, but if people are going to start a rukus over WAITERS avoiding taxes, how focusing on EVERY CORPORATION IN THE COUNTRY. The corporation was created specifically to avoid paying taxes, for no other reason that to protect their own money from the government. So how is that different from a waiter not reporting a $2 tip?

  20. Heather says:

    More reasons to tip in cash:

    As a former waitress, I can give you several additional reasons.

    Denise already touched on one tax-related issue. About fifteen years ago, I was waiting tables and reporting an accurate number every night for tips, as a matter of principle. Most nights this came to more than the 8% of sales that is mandated. One night it did not. When it came time to file a tax return, guess what? I got royally screwed for that ONE night of under 8%–penalties, fees, and extra fees to the accountant who had to figure it all out and fix it. I think it cost me about $75–a measly sum to many, but for a starving graduate student waiting tables to pay for the ramen noodle dinners I was eating, that was a fortune. I was ticked. Do you want to guess whether I continued to dutifully report my exact numbers each night?

    Now, for several non-tax-related reasons. One: Some restaurants (especially those where you pay at a check-out station rather than at the table) rely on the organizational skills and good faith of whatever underpaid and probably underachieving person is manning the cash register to keep track of CC tips and make sure they get to the right person. Do you want to guess how many of those CC tips actually get passed on to the person who earned them? Cash on the table, however, is usually spied very quickly by the appropriate person and picked up. Better yet, hand the money to the server directly if you can catch her/him at a non-busy moment–but don’t make a big deal out of it. You don’t need her to kow-tow her gratitude. You just want to make sure the right person gets paid.

    Two: Cash is pleasant. It’s nice to have a pocketful of the stuff gradually bulging your apron over the course of the evening. It gives you something nice to think about while you’re grinning servilely at the obnoxious guests who think it’s fun to send you back to the kitchen for something else every time you bring them something, whether they actually need it or not.

    Three: Immediate gratification. Some restaurants do in fact wait and pay CC tips at the end of the pay period. This means, instead of rent (or ramen dinner) money tonight, I get it next week some time. While some may say I should learn better money management skills so I don’t *need* the money right NOW, I think most business people would agree that cash flow is a very important factor in any financial plan. You know, time value of money and all that. Go ahead and make sure your server gets the money now–after all, even if they’re flush enough to sock it away somewhere for a rainy day, they’ll get seven or ten extra days of interest on it. Tell the bank that doesn’t matter and see what they say.

    So, regardless of whether you approve of servers avoiding taxes or not, there are plenty of reasons to tip in cash when you can. I’ll admit, I do sometimes add the tip to the CC receipt (especially in sit-down restaurants where you pay at the table, so I know the server will see it him/herself) when I don’t have enough cash. But I also often deliberately leave cash in my purse for the specific purpose of tipping. It’s also handy to have some ones on hand to offer street people and homeless folks who ask. But that’s just me, and an entirely separate issue altogether…

  21. mb says:

    I have heard that the Fed assumes all waiters/ waitresses lie a bit about income, and adjust accordingly… so in the long run, it prob’ly wont make to big a difference for the taxes. My friends who are waiters like the cash, less of a hassle to deal with.

  22. Bob says:

    The law is to pay your taxes. Where did you learn it was ok for you to cheat the government. If you don’t like working for tips then get another job.

  23. As a waitress myself... says:

    I LOVE cash tips, but not for the fact that they can “disappear”…

    The restaurant that I work at not only charges us a credit card processing fee of 2%, but they do so on our total SALES.

    So your dinner bill comes to $100, you leave a $20 tip on the credit card, I’m charged (by my employer) $2.40 for the whole transaction out of my creidt card tips at the end of the night. Your $20 tip to me leaves me with $17.60 tip when it’s all said and done.

    Now, if you leave me a cash tip, my employer only takes out $2.

    The only way I’ll get the whole tip that you intend for me to is if the customer pays the whole bill and tip in cash.

    Anyone know if this is even legal? and who would I go to?

  24. Bob Sucks says:

    Everyone should always tip in cash, and hand it directly to the person they intend to give it to.

    If you leave it on your charge or credit card, managers at restaurants will in most cases STEAL it from the people who do all the hard work. It will never FULLY make it into the pocketbook of your underpaid, overworked server.

  25. Wilma says:

    I once thought that tipping in cash helped them to report what they wanted to the IRS but a bartender set me straight. The IRS expects you to get a certain amount any way and treat it accordingly. They know how much the place you work serves and brings in money wise. Nobody is getting away with much. The IRS always gets theirs.


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