The question on tips brought several emails. Here are a couple of the questions or comments and my responses.
Q. In my salon I have solved the tip problem by having my stylists sign a paper saying that they are responsible for any taxes on their tips. My accountant told me that I could do this.
Ashley
A. Sorry, but the person that is advising you is wrong. You, as the employer are required by law to account for tips. By law, tips received by your employees are considered additional wages even though you my never see the money. If you would like more information on tip reporting you can go to the IRS website and do a search, or I have a Tip Book and audio CD that explains tips in detail. Contact my office at 800.975.4829 and ask for Amanda if you are interested.
Q. I have calculated what it will cost me if I start paying taxes on the tips that my stylists receive. I'm not very profitable to start with but don't want to get into trouble with the IRS. I am thinking about putting a sign up that says "No Tipping!" What do you thing?
Karen
A. My first thought is you would need to determine how your employees would feel about not getting tips. This could cause a problem hiring and retaining people. We see articles all the time on the merits of tipping. There definitely are two sides to the issue. As far as the IRS is concerned, even though you have a no tipping policy you would still need to make sure that if the IRS came calling you could justify that you do not receive tips.
Q. Larry, I have to share with you my experience on tips. I decided that as of the first of the year that I was going to have my staff report their tips to me. I was concerned as to how they would react. I took time and explained the law to them. I also shared information from your book and CD. After taking a deep breath I told the stylist my plan to have them report their tips to me. I could not believe their response. They were happy. I heard comments that they were under stress because they were worried about the IRS. Also they said that having the cash which was not reported did not help them with their personal finances. I have only had one nail tech leave to go to a salon that did not require tip reporting. Thanks for your help.
Bob
A. Thanks for sharing your experience with us and thanks for your kind comments.
Q. In my salon I have solved the tip problem by having my stylists sign a paper saying that they are responsible for any taxes on their tips. My accountant told me that I could do this.
Ashley
A. Sorry, but the person that is advising you is wrong. You, as the employer are required by law to account for tips. By law, tips received by your employees are considered additional wages even though you my never see the money. If you would like more information on tip reporting you can go to the IRS website and do a search, or I have a Tip Book and audio CD that explains tips in detail. Contact my office at 800.975.4829 and ask for Amanda if you are interested.
Q. I have calculated what it will cost me if I start paying taxes on the tips that my stylists receive. I'm not very profitable to start with but don't want to get into trouble with the IRS. I am thinking about putting a sign up that says "No Tipping!" What do you thing?
Karen
A. My first thought is you would need to determine how your employees would feel about not getting tips. This could cause a problem hiring and retaining people. We see articles all the time on the merits of tipping. There definitely are two sides to the issue. As far as the IRS is concerned, even though you have a no tipping policy you would still need to make sure that if the IRS came calling you could justify that you do not receive tips.
Q. Larry, I have to share with you my experience on tips. I decided that as of the first of the year that I was going to have my staff report their tips to me. I was concerned as to how they would react. I took time and explained the law to them. I also shared information from your book and CD. After taking a deep breath I told the stylist my plan to have them report their tips to me. I could not believe their response. They were happy. I heard comments that they were under stress because they were worried about the IRS. Also they said that having the cash which was not reported did not help them with their personal finances. I have only had one nail tech leave to go to a salon that did not require tip reporting. Thanks for your help.
Bob
A. Thanks for sharing your experience with us and thanks for your kind comments.
