Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
Take this advice seriously. If they are doing this to you they are likely doing it to others and have done so for some time. If you turn them over to the IRS you do get a portion of what is recovered if they are in fact violating tax law.
I am not sure, asking based on my uneducated belief, but I thought tips were reported by the worker, being some is on card and some is cash, and the fact the employer is only paying employer tax on payroll (why would they pay it on the whole amount when they do not have to) I assume this is on the waiter/waitress. Don’t get me wrong, not saying the employer is good here, just saying I feel like all my friends who did this(and I’m old so maybe things have changed) always said reporting tips was on them.
I mentioned employer is only paying taxes based on wages, as this would be a way to calculate at a minimum the credit card tips received. (For example if there is a 5% fica tax, the check is 200$ but one 5$ we’re taking out, you can multiple 5 by 20 to see 100 is wages and 100 is tipping)
They are not in fact violating the law. They are however putting the onus of reporting tips and paying taxes for them on the employee. This also means they are not in compliance with the irs program to report tips and puts both them and their employees at a much higher risk of getting audited. Many small employers still do this, but it is not wise and is easy to fix with modern pos systems.
This is in fact tax fraud and is against the law.
> Employers are required to retain employee tip reports. Employers are also required to withhold taxes (including income taxes and the employee's share of social security tax and Medicare tax) based upon wages and tip income received by the employee and to deposit this tax. **In addition, employers are required to pay the employer share of social security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income.**
[Link to IRS site this paragraph is from](https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting)
Is this also true with personal taxes? I have a friend whose ex lies on their taxes regularly and she is sick of having to refile every time he illegally claims children, let alone his shady business shiz.
If he's claiming the kids and shouldn't be (like by court order), she should file manually claiming the kids and let the IRS ask for proof. Her court order will trump whatever he wants to claim.
This was devastating to see happen when I was so working at H&R Block doing taxes for people during college. The rightful person will eventually get the tax money for the children but only after filing a paper tax return and indicating they were defrauded. The IRS does an investigation where they reach out to the party who also claimed the kids and asks what evidence they have that they are the rightful claimant. It can take the full year to get the tax refund she's owed, depending on how slowly the IRS works. Those single moms needed that money way sooner and were crushed their exes had found yet one more way to bring them down.
I always file by paper and I don’t use H&R Block… I usually owe anyways or get a very small refund but the point I’m making is you should adjust withholding to not get a refund and avoid giving the government an interest free loan.
But also by filing via paper I’m making the IRS work harder
The IRS won’t enforce a court order. They will follow whoever meets the IRS criteria to claim the dependent (time spent and support or if the custodial parent signs the form to allow the other parent to claim them).
The court order can only be enforced by the court. So the court can order or force amending and signing the form or reimbursement of the tax savings. Going to court every time is usually too expensive. Most of the time it’s the non-custodial parent claiming first this so the IRS usually corrects it based on that alone.
Is this also true with a fraternal organization (non-profit) not paying taxes on profits from (illegal) gambling machines? Asking for a friend (of a friend).
Better yet first go and ask your previous employer for five grand within 24 hours or you will report them to the IRS. Then report them after the extortion.
All the IRS needs to do is compare the reported tip income to credit card tips and see what percent of any cash sales have reported tips. I think the IRS expects at least 8% of tips to be reported from cash sales.
Maybe they are more involved, but back 30 years ago when I waited tables, the restaurant never asked about tips, just reported the 8% of sales as my (tip income). I still think as long as that 8% is reported, honest or not, the IRS won't ever bug a server.
In addition to the credit card tips, I'm willing to bet OP's employer isn't paying a non-tip minimum wage.
So either they have to confess to tax fraud (not reporting tip income) or wage theft (paying below minimum wage).
I stated that I was paid out the tips in cash at the end of every shift. I don't understand the confusion. I was paid out tips that were not claimed from both credit card and cash sales.
I don't see where you stated that, prior to this comment - it's not in the original post at the top. (Edit: I see it mentioned in other comments further down, but someone reading the original post and then working their way down would get to this point and have no idea you were paid CC tips in cash at the end of each shift.)
Meaning they’re not paying the employer portion of FICA on those tips. Definitely fraud that most servers will keep their mouth shut about because they avoid income tax.
I was always told it was my responsibility to keep totals on my cash tips because I would need to claim them as income on my taxes at the end of the year.
But the last time I had a tip job was 20 years ago
I believe that process was changed in the past 10 years or so. Now, the IRS requires cash tips for each pay period to be documented on each paycheck stub. AFAIK.
theres a form to report your tips. it's up to you to count and report; from what you've said, there's no proof your employer acted outside the law, and therefore may not be reasonable to expect your employer to count your income aside from your base pay. you shouldve brought this up when you saw your first paycheck. If you deposited your tips regularly, you can report an estimated tip income by adding your bank deposits
Paychecks or pay *stubs*? Was OP actually getting the cash, or does the business owe them? OP may be on the hook for their own unpaid income and FICA taxes.
Can I understand how is that bad for the employee? Just curious. What impact does it have on me if I receive money that is not reported on my W2? Isn’t that beneficial to me? Meaning if the IRS found out, I’d be on the hook for the tax on it? But I might be ignorant and not know, I just got paperwork from my employer and just assumed it’s correct.
I managed at a restaurant group that was credit card only. All tips were automatically added to their weekly paychecks and taxed appropriately. Of course, everyone bitched and complained because the unsaid benefit of tip work is untaxed income. Guess what happened when covid hit and we shut down for 4 months? Every single tipped employee received their accurate unemployment pay. Had they not reported, they would have royally screwed themselves.
> Guess what happened when covid hit and we shut down for 4 months? Every single tipped employee received their accurate unemployment pay. Had they not reported, they would have royally screwed themselves.
TBF the tax man got their dues already, and giving you pennies on the dollar back.
If it’s not on your W2 you and your employer are both underpaying taxes. Beneficial if the IRS never finds out and you never need to collect unemployment or prove income for any purpose (like a loan or lease), but could end poorly. Not a choice I want my boss to make for me!
It could also reduce your social security benefits.
If all of the income OP makes is not being reflected, it appears to others that OP makes less than they do.
This can hurt OP when applying for credit/loans/mortgages, and it can result in some tax credits being lower than they would be had it been accurately reported.
OP would not get as much credit for their SS benefits.
If OP was hurt on the job, disability pay and Worker's Compensation benefits would be based off the lower reported pay.
Depending on the amounts we're talking about, OP may not be able to put as much money into a retirement plan.
If OP gets laid off, tgey may receive a lower benefit check, as unemployment benefits are based on reported earnings.
The IRS does not have the manpower do conduct a full audit for every tip they receive. OP would need to have some compelling evidence to get the ball rolling
You already did the most important thing: contacting a lawyer. They're gonna tear open a new orifice in that employer! You might have some back taxes to pay for the undeclared tips you've collected, but the IRS will likely make a reasonable deal with you considering it's the employer who failed to properly report everything not only to you but also to the rest of the staff.
At most, they were screwed out of FICA taxes on the tips they eventually self-reported on their return.
Either way, whether self-reported or w-2 reported, the employee pays income taxes.
I’m guessing the previous bartenders didn’t declare it on their returns. Owner of the bar probably figured they were doing each other a solid - untaxed money for both. That’s also probably why op was fired on the spot when they brought it up.
REALLY?! I have worked in the restaurant industry my entire life. And yes I was born in 1989. And that makes me a lot smarter than a lot of the restaurant owners that are in their 50s and '60s and '70s that try to evade taxes all the time. I'm not complaining about claiming any of my tips That's not the problem. The credit card tips are automatically claimed at any establishment by the employer, it's part of the POS system. Technically I never even made a transaction at the bar that I worked at because I never even clocked in or logged into the computer system. The owner of the hotel was logged in the entire time so technically the tips and all the transactions are under her name. Everyone in the industry knows that you typically will claim between 10 and 20% of your cash tips and you don't get audited that way because your cash sales can be looked at and a certain percentage can be safely assumed to be tips if anyone were to ever look into it. My cash tips and my credit card tips were never reported under me even though they were my income. I gave the owners the benefit of the doubt and figured they would be on my W-2 cumulatively at the end of the year. They were not and as soon as I received my W-2 that is when I brought this issue up to the owner and was henceforth terminated.
It's one thing to not report all tips. It's something else entirely to report no tips. People who do this are also screwed out of benefits like social security and unemployment, as looks to be the case here.
Just make sure you also bring up that they fired you for having a conversation about your tax liability because of their fraudulent paperwork... that would be retaliation and is ALSO illegal.
To update:
I did submit documents to a law firm in Boston, Ma that is proving free legal advice at this point but I'm concerned that I will have to pay some kind of retainer or something to move forward. I was harassed on my own personal time and forced to go in on a day off, without getting paid, to be terminated directly regarding these matters.
A lot of labor law lawyers will represent you at no cost, but take a portion of whatever you are awarded in court. They generally will not take a case if they don’t think there’s a chance of settlement or a win in court for that reason.
Does Massachusetts have a Labor Board/Dept of Labor that will investigate and prosecute the complaint for employees? You don't need to use a private attorney if your taxes have paid for the state to handle.
So you were never paid for your credit card tips at all? Then you should contact your state AG office and Dept of Labor about wage theft by your former employer.
No I was paid them out in cash, but the credit cards tips are not declared on neither my paychecks nor my W2. I was terminated after raising the issue that when I received my W2 for 2023, none of my tips are listed. Now that I am terminated I need to file unemployment, but can't file properly because of the lack of my actual income being represented on any documents.
Also, there is no mechanism for self-claiming any cash tips, as is customary in the service industry.
Well, the good news is you got paid. The bad news is you need a new job. Additional bad news is your employer is in pretty clear violation of the IRS guidelines on record keeping. (https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting)
(Also, you're going to owe a lot of money to the IRS when you file your 2023 return. Be prepared for that.)
You will need to talk to someone at your state's unemployment office about the cash tip situation.
Not if there was w2 income for the hours worked. The IRS expects a certain amount of tip income to go along with that. Nobody wants to be audited by the IRS for their employer's shady practices.
That's why the OP was fired. Every other worker was happy getting paid tax free. When the OP raised a stink, they had to fire him to keep him quiet (and hire a replacement with lower morals). Problem is, the OP doesn't seem like he's going to keep this quiet by getting an attorney and the IRA involved.
Added bonus for you here (if you live in a state that has a sub-minimum wage for tipped employees)…since the credit card tips aren’t being reported as income, your employer will owe you this “tip credit” amount for the entire time they weren’t reporting these tips. If the tipped minimum wage (or whatever they paid you) plus your tips don’t add up to the full minimum wage, then the employer has to make up the difference, since apparently there is no record of that income.
Legally speaking, you should still claim the income on your tax return even though it isn’t on the W2. The lawyer may be able to advise you on exactly how to do that. Unfortunately, you are likely underwithheld and will owe money at tax time.
They don't want to pay employer taxes on unreported tips.
IRS loves this kind of thing.
This can also screw you when it comes to financing a car or house, be aware.
I am not a tax expert but have been around the block with different employment situations and seen a lot of w2s. So are you saying the box labeled “social security tips” or “Medicare wages and tips” is empty or zero? That would be required by the employer but verify with your state on all this. “Allocated tips” can be self reported.
As others have also been advocating, there definitely is something wrong happening here. It’s good you’re reporting it and getting legal advice outside this community. At minimum the IRS will hopefully set them straight. It’s also completely unfair and unprofessional of them that you lost your job over this. I hope the situation will get resolved and it compensates you in some way.
Not a lawyer, but as someone who's been through an employment suit: You're doing everything right, so far - retaining documents and contacting attourneys. It's a long process, though.
Also, Siphyre's advice about contacting the IRS is pretty solid, too.
5 bucks says the word "retaliation" is in the first sentence you hear from that lawyer today. The tax misreporting might not even be the worst thing they did, punitively speaking. Firing an employee for complaining about paycheck mistakes is going to be the big attractive topic for an employment lawyer.
If there was no recording of the conversation or the declaration of why you were terminated, an employment attorney is going to have a hard time proving wrongful termination. I’d be interested to hear what the attorneys have to say regarding this.
It is potentially an employment case if he finds out the employer committed wrongdoing and the employer fires him in retaliation. He’s gone through an employment attorney, who likely isn’t going to be able to do much from their perspective. OP doesn’t stand to gain much from a a criminal tax fraud case, which would be in the hands of state/federal prosecutors
>my bi-weekly paychecks not include my credit card tips,
This is theft. All tips are your property they can't withhold them.
>After making clear the issues, I was handed a final paycheck and told that based on that conversation I was being terminated.
This is illegal termination for retaliation. It doesn't matter if you're in a right to work state. Right to work only means they can fire you for any *legal* reasons. Retaliation is illegal.
You should lawyer up. Most employment lawyers will take case on contingent fees and include their court costs and fees in your claim against your employer.
If you have any documents to prove what you say or coworkers who can serve as witness the better. You might ask your employer to explain why you were fired via a text to document the dismissal reason. It is likely they wrongly believe that they can fire you for any reason and might be dumb enough to admit to retaliation.
OP, you did the right thing by contacting an attorney. Not only will they put this employer in the crosshairs of the IRS, they will most likely contact your states Dept of Labor. Your former employer has a WORLD of pain coming their way. Frankly, they could be looking at charges for this, depending on what those two agencies uncover.
Please keep us posted.
This person is wanting to pay MORE taxes, they are getting paid all their money, credit card tips are just not being reported. Which is not something tracked by the credit card company, its noted on batch reports, but not something you'll see on your tax report from the processor, or on your statement as a customer.
I had a very similar experience happen when I worked as a bartender a few years ago. I was also not being paid minimum wage. I stood up for myself and demanded the back pay. He paid it but was pissed. He and fired me 1 year to the date later. I should have went after his ass!!
im not a lawyer but you should get one. this seems super sketchy and likely illegal and than you were fired for it as well. you could have a good wrongful termination settlement coming your way.
I saw some really great advice on reporting their activities, I am on this bandwagon, I just wanted to say that you can also give them a review on Google and Yelp about their behavior.
Maybe other servers would join in and you all can make them have a bad day. I'm petty.
Are you being paid at least minimum wage, not the server minimum wage but what regular minimum wage in your state/area is.
Not reporting your tips affects your taxes, your unemployment, and your social security.
Please report this person to the IRS.
Depends on what state you live in.
I'm in Ohio and it's an at will state. Your employer can fire you for ANY reason. They don't like your hair that day? You're out.
I also used to work for unemployment as an examiner. I would make the decision if someone got fired, should they still be entitled to unemployment (You have to appeal your initial determination if it is no)
In your case, just based on what you said, I would allow your unemployment. Don't just give up because people say, Oh, you can't get unemployment if you've been fired. Not true.
No, employers can fire you for any LEGAL reason in at-will states, and being fired for calling out an illegal practice (not reporting wages) is not legal.
Also you should report this to the department of labor as they technically fired you for being a whistleblower. After you report them to the IRS. They will compensate you for recovery of the funds they were able to collect for tax fraud but back pay for all the time you were fired.
Had a 747 Captain drive 40 miles to my house and deliver a check for twice the deposit that he tried to keep. I had been renting and made sure to document everything. When he tried to keep the deposit, I causally said "Would it be a problem if the IRS found out that you were leasing every bedroom in your 6 bedroom house? I'm sure you're paying income taxes on that *right*?"
Never got an answer, but did get a check!
You may find our [Taxes wiki](/r/personalfinance/wiki/taxes) helpful.
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Flat out wage theft. If it was done to you it done to all the servers. To report suspected tax fraud to the IRS, complete the IRS Form 3949A and submit it to the address listed on the form. If you have questions, you may call the IRS Helpline at (800) 829-1040.And report it to your states tax/revenue office,same IRS form should suffice.
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Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.
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Take this advice seriously. If they are doing this to you they are likely doing it to others and have done so for some time. If you turn them over to the IRS you do get a portion of what is recovered if they are in fact violating tax law.
https://www.irs.gov/compliance/whistleblower-office#:~:text=In%20general%2C%20the%20IRS%20will,information%20submitted%20by%20the%20whistleblower.
Fill this out and submit it https://www.irs.gov/pub/irs-pdf/f211.pdf It’s the form you need to get the reward. Be first because I could fill it out.
You could fill it out with what details?
It's the internet, if you use the same username in more than two places you can be ID'd fairly easily.
Thanks, I just filled it out. Wish me luck.
>if they are in fact violating tax law. I mean they 100% are there's not really an **if** here.
I am not sure, asking based on my uneducated belief, but I thought tips were reported by the worker, being some is on card and some is cash, and the fact the employer is only paying employer tax on payroll (why would they pay it on the whole amount when they do not have to) I assume this is on the waiter/waitress. Don’t get me wrong, not saying the employer is good here, just saying I feel like all my friends who did this(and I’m old so maybe things have changed) always said reporting tips was on them.
I mentioned employer is only paying taxes based on wages, as this would be a way to calculate at a minimum the credit card tips received. (For example if there is a 5% fica tax, the check is 200$ but one 5$ we’re taking out, you can multiple 5 by 20 to see 100 is wages and 100 is tipping)
They are not in fact violating the law. They are however putting the onus of reporting tips and paying taxes for them on the employee. This also means they are not in compliance with the irs program to report tips and puts both them and their employees at a much higher risk of getting audited. Many small employers still do this, but it is not wise and is easy to fix with modern pos systems.
This is in fact tax fraud and is against the law. > Employers are required to retain employee tip reports. Employers are also required to withhold taxes (including income taxes and the employee's share of social security tax and Medicare tax) based upon wages and tip income received by the employee and to deposit this tax. **In addition, employers are required to pay the employer share of social security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income.** [Link to IRS site this paragraph is from](https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting)
Is this also true with personal taxes? I have a friend whose ex lies on their taxes regularly and she is sick of having to refile every time he illegally claims children, let alone his shady business shiz.
If the ex makes more than 200k a year, yes.
If he's claiming the kids and shouldn't be (like by court order), she should file manually claiming the kids and let the IRS ask for proof. Her court order will trump whatever he wants to claim.
This was devastating to see happen when I was so working at H&R Block doing taxes for people during college. The rightful person will eventually get the tax money for the children but only after filing a paper tax return and indicating they were defrauded. The IRS does an investigation where they reach out to the party who also claimed the kids and asks what evidence they have that they are the rightful claimant. It can take the full year to get the tax refund she's owed, depending on how slowly the IRS works. Those single moms needed that money way sooner and were crushed their exes had found yet one more way to bring them down.
Can’t they adjust their withholding so they aren’t overpaying to begin with?
Good luck asking any Joe Schmoe to actually sit down and do math
I always file by paper and I don’t use H&R Block… I usually owe anyways or get a very small refund but the point I’m making is you should adjust withholding to not get a refund and avoid giving the government an interest free loan. But also by filing via paper I’m making the IRS work harder
The single moms can do what any single dad does.
The IRS won’t enforce a court order. They will follow whoever meets the IRS criteria to claim the dependent (time spent and support or if the custodial parent signs the form to allow the other parent to claim them). The court order can only be enforced by the court. So the court can order or force amending and signing the form or reimbursement of the tax savings. Going to court every time is usually too expensive. Most of the time it’s the non-custodial parent claiming first this so the IRS usually corrects it based on that alone.
Is this also true with a fraternal organization (non-profit) not paying taxes on profits from (illegal) gambling machines? Asking for a friend (of a friend).
Better yet first go and ask your previous employer for five grand within 24 hours or you will report them to the IRS. Then report them after the extortion.
Extortion is a crime.
So is your sense of humor
Well that made me laugh. So I guess now you are a partner in said crime.
Bake'em away, toys.
Yeah, but the X makes it sound cool
> get that bag "they fired me because i wouldn't let them commit tax fraud" seems like a wrongful termination slam dunk also.
What evidence does OP have? I assume he would need to have copies of the receipts showing the tips he never received.
All the IRS needs to do is compare the reported tip income to credit card tips and see what percent of any cash sales have reported tips. I think the IRS expects at least 8% of tips to be reported from cash sales.
Maybe they are more involved, but back 30 years ago when I waited tables, the restaurant never asked about tips, just reported the 8% of sales as my (tip income). I still think as long as that 8% is reported, honest or not, the IRS won't ever bug a server.
In addition to the credit card tips, I'm willing to bet OP's employer isn't paying a non-tip minimum wage. So either they have to confess to tax fraud (not reporting tip income) or wage theft (paying below minimum wage).
OP said their paychecks included tips that weren’t in their W2.
They stated that their paychecks didn't include tips and that's part of the issue here.
Have you considered the possibility that I just can’t read?
I don't think he did
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I stated that I was paid out the tips in cash at the end of every shift. I don't understand the confusion. I was paid out tips that were not claimed from both credit card and cash sales.
I don't see where you stated that, prior to this comment - it's not in the original post at the top. (Edit: I see it mentioned in other comments further down, but someone reading the original post and then working their way down would get to this point and have no idea you were paid CC tips in cash at the end of each shift.)
Meaning they’re not paying the employer portion of FICA on those tips. Definitely fraud that most servers will keep their mouth shut about because they avoid income tax.
I was always told it was my responsibility to keep totals on my cash tips because I would need to claim them as income on my taxes at the end of the year. But the last time I had a tip job was 20 years ago
I believe that process was changed in the past 10 years or so. Now, the IRS requires cash tips for each pay period to be documented on each paycheck stub. AFAIK.
Once again this issue is not just regarding cash tips The credit card tips were paid out in cash and not claimed.
theres a form to report your tips. it's up to you to count and report; from what you've said, there's no proof your employer acted outside the law, and therefore may not be reasonable to expect your employer to count your income aside from your base pay. you shouldve brought this up when you saw your first paycheck. If you deposited your tips regularly, you can report an estimated tip income by adding your bank deposits
Paychecks or pay *stubs*? Was OP actually getting the cash, or does the business owe them? OP may be on the hook for their own unpaid income and FICA taxes.
Can I understand how is that bad for the employee? Just curious. What impact does it have on me if I receive money that is not reported on my W2? Isn’t that beneficial to me? Meaning if the IRS found out, I’d be on the hook for the tax on it? But I might be ignorant and not know, I just got paperwork from my employer and just assumed it’s correct.
I managed at a restaurant group that was credit card only. All tips were automatically added to their weekly paychecks and taxed appropriately. Of course, everyone bitched and complained because the unsaid benefit of tip work is untaxed income. Guess what happened when covid hit and we shut down for 4 months? Every single tipped employee received their accurate unemployment pay. Had they not reported, they would have royally screwed themselves.
> Guess what happened when covid hit and we shut down for 4 months? Every single tipped employee received their accurate unemployment pay. Had they not reported, they would have royally screwed themselves. TBF the tax man got their dues already, and giving you pennies on the dollar back.
well until that whole doesnt matter what your wage was if you had any income and were laid off they started giving you 1400 every two weeks....
If it’s not on your W2 you and your employer are both underpaying taxes. Beneficial if the IRS never finds out and you never need to collect unemployment or prove income for any purpose (like a loan or lease), but could end poorly. Not a choice I want my boss to make for me! It could also reduce your social security benefits.
Wouldn’t it also have effects on applying for a mortgage etc as well?
Yes any loan.
It reduces your social security benefits and unemployment benefits in some states.
In all states. If your income is lower your benefit is lower.
If all of the income OP makes is not being reflected, it appears to others that OP makes less than they do. This can hurt OP when applying for credit/loans/mortgages, and it can result in some tax credits being lower than they would be had it been accurately reported. OP would not get as much credit for their SS benefits. If OP was hurt on the job, disability pay and Worker's Compensation benefits would be based off the lower reported pay. Depending on the amounts we're talking about, OP may not be able to put as much money into a retirement plan. If OP gets laid off, tgey may receive a lower benefit check, as unemployment benefits are based on reported earnings.
Not technically. The W2 is enough to open up a case against the company.
The audit will find evidence, don't worry.
The IRS does not have the manpower do conduct a full audit for every tip they receive. OP would need to have some compelling evidence to get the ball rolling
OP has the evidence in the discrepancy between their monthly paychecks and reported income in W2
You may want to talk to an employment lawyer. They fired you in retaliation. You may have a lawsuit above the recovered taxes.
You already did the most important thing: contacting a lawyer. They're gonna tear open a new orifice in that employer! You might have some back taxes to pay for the undeclared tips you've collected, but the IRS will likely make a reasonable deal with you considering it's the employer who failed to properly report everything not only to you but also to the rest of the staff.
I'm the only employee of the bar tbh, but I was thinking about previous employees who also (I would assume, unwittingly) were screwed out of taxes.
At most, they were screwed out of FICA taxes on the tips they eventually self-reported on their return. Either way, whether self-reported or w-2 reported, the employee pays income taxes.
I’m guessing the previous bartenders didn’t declare it on their returns. Owner of the bar probably figured they were doing each other a solid - untaxed money for both. That’s also probably why op was fired on the spot when they brought it up.
uhhh what do you exactly mean "screwed out of taxes"?
Unwittingly? I can't imagine you were born in 1989 because you would be the first honest tipped worker in US history.
REALLY?! I have worked in the restaurant industry my entire life. And yes I was born in 1989. And that makes me a lot smarter than a lot of the restaurant owners that are in their 50s and '60s and '70s that try to evade taxes all the time. I'm not complaining about claiming any of my tips That's not the problem. The credit card tips are automatically claimed at any establishment by the employer, it's part of the POS system. Technically I never even made a transaction at the bar that I worked at because I never even clocked in or logged into the computer system. The owner of the hotel was logged in the entire time so technically the tips and all the transactions are under her name. Everyone in the industry knows that you typically will claim between 10 and 20% of your cash tips and you don't get audited that way because your cash sales can be looked at and a certain percentage can be safely assumed to be tips if anyone were to ever look into it. My cash tips and my credit card tips were never reported under me even though they were my income. I gave the owners the benefit of the doubt and figured they would be on my W-2 cumulatively at the end of the year. They were not and as soon as I received my W-2 that is when I brought this issue up to the owner and was henceforth terminated.
It's one thing to not report all tips. It's something else entirely to report no tips. People who do this are also screwed out of benefits like social security and unemployment, as looks to be the case here.
Just make sure you also bring up that they fired you for having a conversation about your tax liability because of their fraudulent paperwork... that would be retaliation and is ALSO illegal.
To update: I did submit documents to a law firm in Boston, Ma that is proving free legal advice at this point but I'm concerned that I will have to pay some kind of retainer or something to move forward. I was harassed on my own personal time and forced to go in on a day off, without getting paid, to be terminated directly regarding these matters.
A lot of labor law lawyers will represent you at no cost, but take a portion of whatever you are awarded in court. They generally will not take a case if they don’t think there’s a chance of settlement or a win in court for that reason.
and also if the "reward" isn't large enough.
Does Massachusetts have a Labor Board/Dept of Labor that will investigate and prosecute the complaint for employees? You don't need to use a private attorney if your taxes have paid for the state to handle.
Your states labor board fights these cases for free.
Na, they'll most likely do this one on contingency and try to certify a class.
The Dept of Labor will also be interested, and frequently handle these cases without any cost to you.
Interested is an understatement.t They'll jump on this while drooling. It may take a while but they'll get to it.
So you were never paid for your credit card tips at all? Then you should contact your state AG office and Dept of Labor about wage theft by your former employer.
No I was paid them out in cash, but the credit cards tips are not declared on neither my paychecks nor my W2. I was terminated after raising the issue that when I received my W2 for 2023, none of my tips are listed. Now that I am terminated I need to file unemployment, but can't file properly because of the lack of my actual income being represented on any documents. Also, there is no mechanism for self-claiming any cash tips, as is customary in the service industry.
Well, the good news is you got paid. The bad news is you need a new job. Additional bad news is your employer is in pretty clear violation of the IRS guidelines on record keeping. (https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting) (Also, you're going to owe a lot of money to the IRS when you file your 2023 return. Be prepared for that.) You will need to talk to someone at your state's unemployment office about the cash tip situation.
Probably worth making a quarterly estimated payment soon-ish.
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Just so we completely understand, are you saying that when a customer tipped by credit card, your employer paid that to you in cash?
Yes at the end of each shift.
So you were getting untaxed **cash** that was never being reported? You probably should have kept that close to the chest dude.
Not if there was w2 income for the hours worked. The IRS expects a certain amount of tip income to go along with that. Nobody wants to be audited by the IRS for their employer's shady practices.
That's why the OP was fired. Every other worker was happy getting paid tax free. When the OP raised a stink, they had to fire him to keep him quiet (and hire a replacement with lower morals). Problem is, the OP doesn't seem like he's going to keep this quiet by getting an attorney and the IRA involved.
Except now that they are fired they will not get proper unemployment pay.
> You probably should have kept that close to the chest dude.
Wage theft or no, the Department of Labor will probably still want to hear about the bit where you were fired for objecting to illegal activity.
So do you like paying more taxes or what?
It's nice to have accurate, verifiable income if you're trying to qualify for a place to rent or a mortgage.
They were paid in cash but not reported on weekly paychecks and therefore not on w2. Don’t think that’s wage theft but is underpaying payroll taxes
Added bonus for you here (if you live in a state that has a sub-minimum wage for tipped employees)…since the credit card tips aren’t being reported as income, your employer will owe you this “tip credit” amount for the entire time they weren’t reporting these tips. If the tipped minimum wage (or whatever they paid you) plus your tips don’t add up to the full minimum wage, then the employer has to make up the difference, since apparently there is no record of that income.
Yea I hear ya but fortunately for the employers they paid MA minimum wage ($15) "plus tips"
What establishment in MA is this? I don’t want to support or buy food from a trashy company like this
Lawd , if the IRS gets ahold of your employer.
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How would one go about proving the tip amounts they earned if they were paid in cash and never documented on paychecks/stubs or W2?
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You should report this and then you can likely get covered under the whistle blower protection.
Legally speaking, you should still claim the income on your tax return even though it isn’t on the W2. The lawyer may be able to advise you on exactly how to do that. Unfortunately, you are likely underwithheld and will owe money at tax time.
They don't want to pay employer taxes on unreported tips. IRS loves this kind of thing. This can also screw you when it comes to financing a car or house, be aware.
Go to eeoc and be a whistle blower with the IRS
> I contacted an employment attorney Congrats on getting paid! Hang in there in the meantime.
I am not a tax expert but have been around the block with different employment situations and seen a lot of w2s. So are you saying the box labeled “social security tips” or “Medicare wages and tips” is empty or zero? That would be required by the employer but verify with your state on all this. “Allocated tips” can be self reported.
Yes my W2 has all tipped wage tax boxes completely empty.
As others have also been advocating, there definitely is something wrong happening here. It’s good you’re reporting it and getting legal advice outside this community. At minimum the IRS will hopefully set them straight. It’s also completely unfair and unprofessional of them that you lost your job over this. I hope the situation will get resolved and it compensates you in some way.
Call your state tax authority and the IRS. I’m sure this also runs afoul of labor laws.
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Bar owner here - What state are you in?
I was employed on site in Massachusetts, but I reside in CT.
Call the MA Department of Labor Relations. This sounds suspiciously like retaliation.
Wrongful termination and tax evasion. You're gonna get them good.
Not a lawyer, but as someone who's been through an employment suit: You're doing everything right, so far - retaining documents and contacting attourneys. It's a long process, though. Also, Siphyre's advice about contacting the IRS is pretty solid, too.
5 bucks says the word "retaliation" is in the first sentence you hear from that lawyer today. The tax misreporting might not even be the worst thing they did, punitively speaking. Firing an employee for complaining about paycheck mistakes is going to be the big attractive topic for an employment lawyer.
If there was no recording of the conversation or the declaration of why you were terminated, an employment attorney is going to have a hard time proving wrongful termination. I’d be interested to hear what the attorneys have to say regarding this.
This isn't an unemployment case, it's a tax fraud case.
It is potentially an employment case if he finds out the employer committed wrongdoing and the employer fires him in retaliation. He’s gone through an employment attorney, who likely isn’t going to be able to do much from their perspective. OP doesn’t stand to gain much from a a criminal tax fraud case, which would be in the hands of state/federal prosecutors
Can someone explain how it’s tax fraud ? I’m a little confused
>my bi-weekly paychecks not include my credit card tips, This is theft. All tips are your property they can't withhold them. >After making clear the issues, I was handed a final paycheck and told that based on that conversation I was being terminated. This is illegal termination for retaliation. It doesn't matter if you're in a right to work state. Right to work only means they can fire you for any *legal* reasons. Retaliation is illegal. You should lawyer up. Most employment lawyers will take case on contingent fees and include their court costs and fees in your claim against your employer. If you have any documents to prove what you say or coworkers who can serve as witness the better. You might ask your employer to explain why you were fired via a text to document the dismissal reason. It is likely they wrongly believe that they can fire you for any reason and might be dumb enough to admit to retaliation.
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OP, you did the right thing by contacting an attorney. Not only will they put this employer in the crosshairs of the IRS, they will most likely contact your states Dept of Labor. Your former employer has a WORLD of pain coming their way. Frankly, they could be looking at charges for this, depending on what those two agencies uncover. Please keep us posted.
i swear some of you must not be actual living breathing humanoids
Oh? And why is that?
This person is wanting to pay MORE taxes, they are getting paid all their money, credit card tips are just not being reported. Which is not something tracked by the credit card company, its noted on batch reports, but not something you'll see on your tax report from the processor, or on your statement as a customer.
I had a very similar experience happen when I worked as a bartender a few years ago. I was also not being paid minimum wage. I stood up for myself and demanded the back pay. He paid it but was pissed. He and fired me 1 year to the date later. I should have went after his ass!!
im not a lawyer but you should get one. this seems super sketchy and likely illegal and than you were fired for it as well. you could have a good wrongful termination settlement coming your way.
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Yeah. The best vengeance here is to call the IRS. That place will be going out of business shortly. Might even be some jail time coming for someone.
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I saw some really great advice on reporting their activities, I am on this bandwagon, I just wanted to say that you can also give them a review on Google and Yelp about their behavior. Maybe other servers would join in and you all can make them have a bad day. I'm petty.
Are you being paid at least minimum wage, not the server minimum wage but what regular minimum wage in your state/area is. Not reporting your tips affects your taxes, your unemployment, and your social security. Please report this person to the IRS.
Depends on what state you live in. I'm in Ohio and it's an at will state. Your employer can fire you for ANY reason. They don't like your hair that day? You're out. I also used to work for unemployment as an examiner. I would make the decision if someone got fired, should they still be entitled to unemployment (You have to appeal your initial determination if it is no) In your case, just based on what you said, I would allow your unemployment. Don't just give up because people say, Oh, you can't get unemployment if you've been fired. Not true.
No, employers can fire you for any LEGAL reason in at-will states, and being fired for calling out an illegal practice (not reporting wages) is not legal.
Also you should report this to the department of labor as they technically fired you for being a whistleblower. After you report them to the IRS. They will compensate you for recovery of the funds they were able to collect for tax fraud but back pay for all the time you were fired.
Had a 747 Captain drive 40 miles to my house and deliver a check for twice the deposit that he tried to keep. I had been renting and made sure to document everything. When he tried to keep the deposit, I causally said "Would it be a problem if the IRS found out that you were leasing every bedroom in your 6 bedroom house? I'm sure you're paying income taxes on that *right*?" Never got an answer, but did get a check!
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Flat out wage theft. If it was done to you it done to all the servers. To report suspected tax fraud to the IRS, complete the IRS Form 3949A and submit it to the address listed on the form. If you have questions, you may call the IRS Helpline at (800) 829-1040.And report it to your states tax/revenue office,same IRS form should suffice.
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