Waitress Has To Give Back Big Tip

View Comments
(Photo illustration by Ed Fischer)

(Photo illustration by Ed Fischer)

feldman_amy Amy Feldman
Amy E. Feldman is a business commentator and legal business...
Read More

By Amy E. Feldman

PHILADELPHIA (CBS) - Why would a restaurant not allow a waitress to keep a huge tip?

It seemed so wonderful. A hardworking waitress at Waffle House got $1000 tip from a customer. Aw. Then so awful: Waffle House’s policy required big tips to be refunded, so she didn’t get it. Oh! Then so lovely: the customer heard about it and wrote the waitress a check. Aw.

And now it’s Uncle Sam’s turn. Huh?

Here’s the thing. In addition to the a restaurant’s fear that it will give cash to the server only to have the customer reneg on the credit card bill, there’s also a tax reason why giving the money could be a problem for the waitress. According to IRS regulations, an employee who gets more than $20 per month in tips has to tell the employer. The employer is required to pay its portion of the FICA taxes on that money, but it’s also required to withhold taxes from the employee’s paycheck. Now the employee has to pay taxes on tips regardless, but where there’s a huge tip given on a single bill, the withholding taxes the restaurant has to take out could be more than the entire paycheck.

Still, here’s a tip for Waffle House. The public wants that waitress to get her tip.

View Comments
Follow

Get every new post delivered to your Inbox.

Join 33,973 other followers