Tuesday, January 10, 2012


Q. I was reading your updates from D.C., good info…was there any discussion on giving salons a tax credit on employees’ tips like restaurants receive?

A. I am sorry to report that there was no discussion at all about a tip credit. I know that PBA has been lobbying for some time for a credit but to no avail. To be honest I am not very optimistic that we ever will see Congress deal with the issue. I am watching and will keep you posted.
It is a pleasure serving you.

Q. I figured as much…I’ve spoken to our congressman’s reps and it goes nowhere.

So, in light of this, what can a salon do? I know salons who likely don’t report any tips because they will ask if you want “cash back” from credit cards, etc and therefore do not record the tips…is that legal?
If it was, would we raise a red flag by dropping our reported tip income all of a sudden? Thanks.

A. As long as you have a signed 4070 (see below) the IRS cannot charge you any penalty or interest if they determine that your staff has committed tax fraud and did not report their tips. You could owe your share of the back tax at 7.65%.

Here is more information from the IRS website. TIP RECORD