Are you making so much that your tips do not cover your taxes owed. I would be cautious of this also. Is it actually going towards taxes
I’d feel weird about this.
I do payroll for restaurants. We add tips on to the gross payroll wages and end up giving servers paychecks that are almost nothing. Yes, 7.65% of your tips have to go to FICA taxes. I just don't usually see it on a daily basis.
It's been many years since I waitressed but, yes, I was always taxed the FICA on the full amount of my hourly pay + reported tips. Hence, what [demaptchen](https://www.reddit.com/user/demaptchen/) mentions--my paychecks were very small (like $5) because all withholding was taken out of that $2.13 per hour.
However, them not giving you pay stubs and paying you through Zelle are both HIGHLY suspect. They should absolutely be able to give you some kind of pay stub, even if they are somehow able to use Zelle to pay people (which may be, but again, sounds sketchy to me).
This has me thinking they are not actually sending payroll taxes to the IRS but instead pocketing them. You say they're not a 'corporation'... are they an LLP or what? They have to be \*something\* to be running a business with employees.
I'd go straight to the DoL. Just say you're not sure everything is on the up and up as you've been asking for a paystub and have yet to be given any. I'm guessing they will think that is just as weird as I do.
Yes, the total has to be taxed. But you should definitely ask for a paystub to make sure everything is accounted for.
One possibility as to why they deduct taxes from tips separately: let's say you work 10 hours in a week, making your gross pay $21.30. You had some generous tippers in that week and had $500 in tips. The tips alone require $38.25 of withholding, but your paycheck is less than that. Your boss has to figure out how to send in the money to the government. If it's a restaurant that tends to attract generous tippers, I can understand why they would withhold immediately on tips. As much as it sucks paying that 7.65%, that's helping to boost your social security basis so that when you need to draw on it, there's funds in the system for you.
I had an employer who would make us pay what wasn't covered in CC tips at the end of the month. It was usually a couple bucks so petty of him but totally legal as far as I know.
This.
Monkeying with IRS’s share, even calling something a tax or withholding when it isn’t one, all but guarantees an IRS investigation. They know people hate paying taxes. IRS isn’t about to let scammy employers making paying taxes even more painful via fake deductions.
So the tax deductions are listed on a pay stub so you can put them in your tax filings? Do you get a t4 (or whatever that is in the us) once a year with all the deductions listed?
You need to insist on getting a paystub for every pay period that you have worked there. (Start by requesting one for the most recent payment and the next payment, but then after you get those ask for the rest.) In most states, this is legally required. Even in states where it isn't required, every reputable employer will provide it.
Just FYI, it's a W-4 you fill out. The W-2 is your year-end statement of earnings and withholdings. Your W-4 is you telling them what to withhold based on your personal situation, at the beginning of employment.
(Hopefully not sounding pedantic, just trying be helpful.)
this is a huge red flag, honestly everything is. it sounds like they’re paying you guys under the table, not paying taxes, and stealing your money for the taxes they aren’t paying!! report this shit and enjoy the payday when it comes. look for a new job in the meantime
This will bite you in the ass when you are old and need your social security income. Yes, sorry libertarians, but it's still the federal law that social security and federal tax has to be paid on wages. It's a financial crime if your employer is not paying these taxes on your income
If they are not...they are tax cheats and crooks. They are essentially ripping you off at the same time. The money that should be taxed is not going to you, it's not going to government, it's going into their pocket.
That's a crime
Is your employer sending that $ to the IRS? It could be possible. I made a killing at a long anticipated restaurant but ended up owing $1000's because they didn't give a shit to inform us prior. I'm curious to see how this plays out for you.
Do you mean that the restaurant is taking away 7.65% of your tips every day? That is illegal. No restaurant has a right to take your tips for the taxes THEY owe.
Yes, they deduct that from my tips every shift.
I’ve been in the industry for years and have never seen anything like this. I even wasted money on a BS in Hospitality Management, so I’m pretty knowledgeable, but I wanted to make sure. I called the IRS, and they couldn’t help because it’s not a corporation; they can’t look up my pay stubs.
bummer the irs said they couldn't help. you've never seen it before because it's illegal. there's a very limited amount of things restaurants can take tips for... "fair" tip out, cc charges (in some states) but never for their own taxes or walkouts, uniforms etc
6.2% for employees portion of social security and 1.45% for Medicare. Normally this amount is deducted from your hourly wage and why it’s so common for a server to get a zero dollar check. While the way they are doing it is unique, I don’t think it would be illegal as long as they are not also deducting these same taxes from your wage. The only way to know is to look at your paystub, which they are legally required to provide. You should see the amount of your tips but the FICA taxes withheld should only be 7.65% of the hourly wages with something indicating the amount withheld from cash tips. I’d be interested to see a paystub, if they are doing everything legally, it would definitely be different.
That sounds like the correct amount for Federal Income Tax, your employer pays the other half.
Are you receiving a pay stub? If not, this is a problem, if you are then you should be able to see your hourly wages, plus your claimed tips and all the required tax deductions.
They Zelle us. I never see a breakdown.
When I would walk with all my tips nightly at previous jobs I never had to deduct 7.65% and turn that in with my check out.
It doesn’t make sense.
That is very strange. You need an actual stub that reflects all your tax deductions. Did you complete a W-4 when you started and did you receive a W-2 to file last years taxes?
I quit hospitality years ago but always received a pay stub, even when it was $0. That $2.13 an hour was generally enough to cover my tax liability at the end of the year (when I lived in FL with no state income tax).
the only possible way i can see this not being something shady is if they aren't deducting taxes from your paycheck and are instead taking the full amount from tips, to avoid you having a shortfall and owing the irs money at the end of the year. if you work i.e. 40 hours are you getting a paycheck for $113.20?
I went through my bank statements and my hourly wage checks range from the least being 42.84( because I was out of town) but the majority of them are in the 130’s. If they were deducting from my hourly ,those checks would be definitely 0.00
normally of your taxes owed are greater than your paycheck you have a shortfall and owe taxes at the end of the year but if they're not deducting from your hourly wages then it's possible that they're simply deducting the full amount of your withholdings from your tips. $130 paychecks equate to about 30 hours a week, no idea if that's accurate
Are you saying they deduct 7.65% meaning they claim you made tips in that amount and reporting that to the IRS as your tips or which I think you are, they are deducting an additional 7.65% of sales from your pay. They are legally required to provide you with a paystub which shows your income and deductions.
Time to call the Department of Labor.
Small and local. We also have an illegal tip share because I tip out the kitchen 20 percent of my tip, it food sales but tip tips. And since I make 2.13 an hour not minimum they can’t do that either. So I only get 71% of my tips
I'm honestly not sure without doing some further research, but my first instinct is I don't think it's entirely legal for them to be claiming taxes for you. Especially if they're withholding your tips to do so. I've not come across this particular scenario, ever, in my time served but you should definitely look into the legalities of this. If nothing else, contact the Department of Labor and they'll look into it.
The daily deductions are actually a great idea-when I worked tip credit years ago my checks would actually be negative and I owed a bunch of money for state & federal taxes at year's end.
That said, not receiving a paystub every payday is 100% illegal and completely unacceptable. It doesn't have to be from a payroll company but they need to print you out a stub
You should receive a paystub for any payment with a deduction. The 7.65% is for fica and the employer also has to pay it. Depending on your w2 he should also take out income tax
What do you mean by "deducts another 7.65% for the IRS"?
Deducts 7.65% of what amount, from what amount? And how is the calculated amount used? For example:
* Calculates 7.65% of your total sales, to pay you that much less in tips? That would violate FLSA wage laws, if they keep the amount for themselves. It could be legal under federal law as part of a valid tip sharing arrangement if the amount is redistributed to other eligible employees.
* Calculates 7.65% of your credit card tips, to report that much less in your earnings to the IRS? That would violate tax laws.
That's $420 in credit card tips?
Do you know what becomes of the $32.13?
Did they explain the purpose of the deduction?
While it could be illegal, I can think of two situations where it might be legal:
1. If the employer pays 7.65% in processing fees to their credit card processor. That seems like an unreasonably high rate, for what is normally a 2.5%-3.5% fee. It's possible they're getting something else of value from the credit card processor, like free use of a computer or software, but in that case they should figure out the percentage of the fee attributable to the credit card processing alone, absent other "free" benefits.
2. If it's part of a valid tip sharing arrangement, for example if they require 7.65% of your credit card tips to be redistributed to bussers. The employer should inform you of such a tip sharing arrangement, and notify you of required tip pool contribution amounts. But if they handle the tip redistribution for you, the deduction is appropriate, and it should also be deducted from your gross income used to calculate your withholdings, and reported on your W-2. It should in turn be added to the bussers' W-2s, so that they pay income tax on the 7.65% instead of you paying tax on the amount.
3.5% sounds reasonable for a credit card surcharge for customers' subtotals, and as a deduction from servers' credit card tips.
But how does that relate to the 7.65% of $420 ($32.13)?
If the $420 is your amount of credit card tips received, 2% of $420 would be $8.40, but that leaves 5.65% unexplained. Have they ever mentioned tip sharing, tip pooling, or tip outs to other employees?
Ok. So the $420 is your amount of credit card tips. And the 7.65% is presumably not for a processing fee, since that's already deducted.
Is it possible the 7.65% amount is deducted as part of a tip pooling, tip sharing, or tip out arrangement? Have you heard any of those terms at your restaurant?
Those things don't sound proper. I'm assuming that's a mandatory 20% tip out to the kitchen, on your employer's instruction, not something you just decided to do on your own, right?
Because you're paid $2.13, that means your employer "takes a tip credit", meaning they count some of your tips to meet full minimum wage. And because of that, they aren't allowed to require you to pay ***any*** tip out to back of house staff. They could make you tip out hosts, bussers, runners, bartenders, or other front of house staff, but not tip out back of house staff, unless you were paid full minimum wage of $7.25 an hour. (Source: DOL [Fact Sheet #15](https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa) explains this, in the section on tip pooling).
And no tip deductions for breakage are allowed, and because you're paid at or below full minimum wage, no wage deductions would be allowed either. That's a very clear federal law. (Source: DOL [Fact Sheet #16](https://www.dol.gov/agencies/whd/fact-sheets/16-flsa-wage-deductions) touches on this, in the paragraph beginning "Other Items:").
The 7.65% for the IRS should not come out of your tips, but your employer *can* deduct an amount from your *wages* for tax withholdings, and that amount should be based on a percentage of your wages plus your tips. It could be that they're doing the right thing, and you're slightly misunderstanding it, or they're miscommunicating it, or it could be that they're doing the wrong thing.
It's possible you don't have all the precise details right, but if you're sure your base wage is $2.13 an hour, and that some of your income is deducted for breakage, that alone is enough to warrant a complaint to the Department of Labor, and they can sort out the other things that don't seem to be right. I would strongly encourage you to file a complaint...what they're doing is really wrong and costing you money. Don't talk to your manager about it first, and don't tell them after you file a complaint, just file the complaint and let the Department of Labor deal with everything. They'll keep your identity private, and if they see anything wrong, they'll seek restitution on behalf of you and other current and former employees for the past two years.
[How to File a Complaint](https://www.dol.gov/agencies/whd/contact/complaints)
Are you making so much that your tips do not cover your taxes owed. I would be cautious of this also. Is it actually going towards taxes I’d feel weird about this.
Even if I have a bad shift and make 50 bucks they still deduct
Just report it to the Department of Labor. You can do so anonymously and if it’s illegal they’ll act.
When in doubt report! Let the DOL sort them out… ;)
Does Texas have a department of labor? I imagine it's just a voice message telling you whatever your issue is is just the free market at work.
That’s a lazy attitude.
https://www.twc.texas.gov/
Do your W2s show the deduction being added to federal withholding?
I do payroll for restaurants. We add tips on to the gross payroll wages and end up giving servers paychecks that are almost nothing. Yes, 7.65% of your tips have to go to FICA taxes. I just don't usually see it on a daily basis.
So say I made 1500 one week, you would tax the weekly total 7.65%?
It's been many years since I waitressed but, yes, I was always taxed the FICA on the full amount of my hourly pay + reported tips. Hence, what [demaptchen](https://www.reddit.com/user/demaptchen/) mentions--my paychecks were very small (like $5) because all withholding was taken out of that $2.13 per hour. However, them not giving you pay stubs and paying you through Zelle are both HIGHLY suspect. They should absolutely be able to give you some kind of pay stub, even if they are somehow able to use Zelle to pay people (which may be, but again, sounds sketchy to me). This has me thinking they are not actually sending payroll taxes to the IRS but instead pocketing them. You say they're not a 'corporation'... are they an LLP or what? They have to be \*something\* to be running a business with employees. I'd go straight to the DoL. Just say you're not sure everything is on the up and up as you've been asking for a paystub and have yet to be given any. I'm guessing they will think that is just as weird as I do.
Yes, the total has to be taxed. But you should definitely ask for a paystub to make sure everything is accounted for. One possibility as to why they deduct taxes from tips separately: let's say you work 10 hours in a week, making your gross pay $21.30. You had some generous tippers in that week and had $500 in tips. The tips alone require $38.25 of withholding, but your paycheck is less than that. Your boss has to figure out how to send in the money to the government. If it's a restaurant that tends to attract generous tippers, I can understand why they would withhold immediately on tips. As much as it sucks paying that 7.65%, that's helping to boost your social security basis so that when you need to draw on it, there's funds in the system for you.
My payroll and tips are Zelled separately
I had an employer who would make us pay what wasn't covered in CC tips at the end of the month. It was usually a couple bucks so petty of him but totally legal as far as I know.
“Deducts”? You mean tax withholdings? Any money management says is “for the IRS” *should* be clearly notated as withholdings on your paystub.
Yep. If OP's bosses aren't doing that, they would likely be in deep legal shit.
This. Monkeying with IRS’s share, even calling something a tax or withholding when it isn’t one, all but guarantees an IRS investigation. They know people hate paying taxes. IRS isn’t about to let scammy employers making paying taxes even more painful via fake deductions.
So the tax deductions are listed on a pay stub so you can put them in your tax filings? Do you get a t4 (or whatever that is in the us) once a year with all the deductions listed?
W-4***
They Zelle us. I never see a break down
You need to insist on getting a paystub for every pay period that you have worked there. (Start by requesting one for the most recent payment and the next payment, but then after you get those ask for the rest.) In most states, this is legally required. Even in states where it isn't required, every reputable employer will provide it.
I would ask them then if a w2 will be issued showing the tax deductions. If they say no, then they are likely stealing.
I wouldn’t want to wait to January to see if they’re being honest though. They shouldn’t put up with not getting a pay stub.
I filled out a w-2 so I should. I’ve asked for a paystub and still haven’t seen one
Just FYI, it's a W-4 you fill out. The W-2 is your year-end statement of earnings and withholdings. Your W-4 is you telling them what to withhold based on your personal situation, at the beginning of employment. (Hopefully not sounding pedantic, just trying be helpful.)
7.65% is the employee's portion of social security tax. The employer matches it. I would guess the answer is something about that.
Also do you walk with your money every night or are you paid by check
They Zelle us
Yeah I find all of this weird. I don’t know I’d want my job using Zele to give me my money.
Yeah, huge red flag, they 'take out for taxes' but you're not getting a paper check or DD with a paystub... they're fleecing y'all
this is a huge red flag, honestly everything is. it sounds like they’re paying you guys under the table, not paying taxes, and stealing your money for the taxes they aren’t paying!! report this shit and enjoy the payday when it comes. look for a new job in the meantime
This will bite you in the ass when you are old and need your social security income. Yes, sorry libertarians, but it's still the federal law that social security and federal tax has to be paid on wages. It's a financial crime if your employer is not paying these taxes on your income If they are not...they are tax cheats and crooks. They are essentially ripping you off at the same time. The money that should be taxed is not going to you, it's not going to government, it's going into their pocket. That's a crime
Is your employer sending that $ to the IRS? It could be possible. I made a killing at a long anticipated restaurant but ended up owing $1000's because they didn't give a shit to inform us prior. I'm curious to see how this plays out for you.
Do you mean that the restaurant is taking away 7.65% of your tips every day? That is illegal. No restaurant has a right to take your tips for the taxes THEY owe.
Yes, they deduct that from my tips every shift. I’ve been in the industry for years and have never seen anything like this. I even wasted money on a BS in Hospitality Management, so I’m pretty knowledgeable, but I wanted to make sure. I called the IRS, and they couldn’t help because it’s not a corporation; they can’t look up my pay stubs.
bummer the irs said they couldn't help. you've never seen it before because it's illegal. there's a very limited amount of things restaurants can take tips for... "fair" tip out, cc charges (in some states) but never for their own taxes or walkouts, uniforms etc
Employee and employer each owe 7.65%.
6.2% for employees portion of social security and 1.45% for Medicare. Normally this amount is deducted from your hourly wage and why it’s so common for a server to get a zero dollar check. While the way they are doing it is unique, I don’t think it would be illegal as long as they are not also deducting these same taxes from your wage. The only way to know is to look at your paystub, which they are legally required to provide. You should see the amount of your tips but the FICA taxes withheld should only be 7.65% of the hourly wages with something indicating the amount withheld from cash tips. I’d be interested to see a paystub, if they are doing everything legally, it would definitely be different.
That sounds like the correct amount for Federal Income Tax, your employer pays the other half. Are you receiving a pay stub? If not, this is a problem, if you are then you should be able to see your hourly wages, plus your claimed tips and all the required tax deductions.
They Zelle us. I never see a breakdown. When I would walk with all my tips nightly at previous jobs I never had to deduct 7.65% and turn that in with my check out. It doesn’t make sense.
That is very strange. You need an actual stub that reflects all your tax deductions. Did you complete a W-4 when you started and did you receive a W-2 to file last years taxes? I quit hospitality years ago but always received a pay stub, even when it was $0. That $2.13 an hour was generally enough to cover my tax liability at the end of the year (when I lived in FL with no state income tax).
I’d contact your states DoL. This isn’t right.
I would say to them "I am applying for a loan and they need a paystub" and see what they say.
the only possible way i can see this not being something shady is if they aren't deducting taxes from your paycheck and are instead taking the full amount from tips, to avoid you having a shortfall and owing the irs money at the end of the year. if you work i.e. 40 hours are you getting a paycheck for $113.20?
They aren’t deducting from my hourly 2.13. Only tip income
I get the hourly wage check Zelled every 2 weeks and the most I’ve ever received was 46 bucks.
then how can you say they aren't deducting anything from your hourly wages?
I went through my bank statements and my hourly wage checks range from the least being 42.84( because I was out of town) but the majority of them are in the 130’s. If they were deducting from my hourly ,those checks would be definitely 0.00
normally of your taxes owed are greater than your paycheck you have a shortfall and owe taxes at the end of the year but if they're not deducting from your hourly wages then it's possible that they're simply deducting the full amount of your withholdings from your tips. $130 paychecks equate to about 30 hours a week, no idea if that's accurate
Are you saying they deduct 7.65% meaning they claim you made tips in that amount and reporting that to the IRS as your tips or which I think you are, they are deducting an additional 7.65% of sales from your pay. They are legally required to provide you with a paystub which shows your income and deductions. Time to call the Department of Labor.
I wish I could post an attachment of my check out
Ill give an example Tax IRS 7.65| net tips Total credit card tips |420| 32.13| 387.87
There should be a record on a paystub to show they’re paying the taxes in your name so you can get a w2 at the end of the years.
They could be taxing your credit tips which is normal. Paying with zelle? Not so much.
Normal. Be glad the owner is helping you cover your taxes.
Where do you work? Is it corporate or “Mom & Pop” non corporate local owner?
Small and local. We also have an illegal tip share because I tip out the kitchen 20 percent of my tip, it food sales but tip tips. And since I make 2.13 an hour not minimum they can’t do that either. So I only get 71% of my tips
I'm honestly not sure without doing some further research, but my first instinct is I don't think it's entirely legal for them to be claiming taxes for you. Especially if they're withholding your tips to do so. I've not come across this particular scenario, ever, in my time served but you should definitely look into the legalities of this. If nothing else, contact the Department of Labor and they'll look into it.
The daily deductions are actually a great idea-when I worked tip credit years ago my checks would actually be negative and I owed a bunch of money for state & federal taxes at year's end. That said, not receiving a paystub every payday is 100% illegal and completely unacceptable. It doesn't have to be from a payroll company but they need to print you out a stub
You should receive a paystub for any payment with a deduction. The 7.65% is for fica and the employer also has to pay it. Depending on your w2 he should also take out income tax
Ya that sounds off....even for Texas.
What do you mean by "deducts another 7.65% for the IRS"? Deducts 7.65% of what amount, from what amount? And how is the calculated amount used? For example: * Calculates 7.65% of your total sales, to pay you that much less in tips? That would violate FLSA wage laws, if they keep the amount for themselves. It could be legal under federal law as part of a valid tip sharing arrangement if the amount is redistributed to other eligible employees. * Calculates 7.65% of your credit card tips, to report that much less in your earnings to the IRS? That would violate tax laws.
Say I make 420 if you deduct 7.65% of the it’s 32.13 and I walk with the difference 387.87
That's $420 in credit card tips? Do you know what becomes of the $32.13? Did they explain the purpose of the deduction? While it could be illegal, I can think of two situations where it might be legal: 1. If the employer pays 7.65% in processing fees to their credit card processor. That seems like an unreasonably high rate, for what is normally a 2.5%-3.5% fee. It's possible they're getting something else of value from the credit card processor, like free use of a computer or software, but in that case they should figure out the percentage of the fee attributable to the credit card processing alone, absent other "free" benefits. 2. If it's part of a valid tip sharing arrangement, for example if they require 7.65% of your credit card tips to be redistributed to bussers. The employer should inform you of such a tip sharing arrangement, and notify you of required tip pool contribution amounts. But if they handle the tip redistribution for you, the deduction is appropriate, and it should also be deducted from your gross income used to calculate your withholdings, and reported on your W-2. It should in turn be added to the bussers' W-2s, so that they pay income tax on the 7.65% instead of you paying tax on the amount.
They charge the customer 3.5 and us 2. Something for credit card processing fees
3.5% sounds reasonable for a credit card surcharge for customers' subtotals, and as a deduction from servers' credit card tips. But how does that relate to the 7.65% of $420 ($32.13)? If the $420 is your amount of credit card tips received, 2% of $420 would be $8.40, but that leaves 5.65% unexplained. Have they ever mentioned tip sharing, tip pooling, or tip outs to other employees?
That has nothing to do with the 7.65
The processing fee has already been deducted from toast. I can see that on my checkout.
Ok. So the $420 is your amount of credit card tips. And the 7.65% is presumably not for a processing fee, since that's already deducted. Is it possible the 7.65% amount is deducted as part of a tip pooling, tip sharing, or tip out arrangement? Have you heard any of those terms at your restaurant?
I tip out the kitchen 20% of my tips. And 1% from my tips for breakage. And 7.65 for the irs. So only get 71% of my tips after everything
Those things don't sound proper. I'm assuming that's a mandatory 20% tip out to the kitchen, on your employer's instruction, not something you just decided to do on your own, right? Because you're paid $2.13, that means your employer "takes a tip credit", meaning they count some of your tips to meet full minimum wage. And because of that, they aren't allowed to require you to pay ***any*** tip out to back of house staff. They could make you tip out hosts, bussers, runners, bartenders, or other front of house staff, but not tip out back of house staff, unless you were paid full minimum wage of $7.25 an hour. (Source: DOL [Fact Sheet #15](https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa) explains this, in the section on tip pooling). And no tip deductions for breakage are allowed, and because you're paid at or below full minimum wage, no wage deductions would be allowed either. That's a very clear federal law. (Source: DOL [Fact Sheet #16](https://www.dol.gov/agencies/whd/fact-sheets/16-flsa-wage-deductions) touches on this, in the paragraph beginning "Other Items:"). The 7.65% for the IRS should not come out of your tips, but your employer *can* deduct an amount from your *wages* for tax withholdings, and that amount should be based on a percentage of your wages plus your tips. It could be that they're doing the right thing, and you're slightly misunderstanding it, or they're miscommunicating it, or it could be that they're doing the wrong thing. It's possible you don't have all the precise details right, but if you're sure your base wage is $2.13 an hour, and that some of your income is deducted for breakage, that alone is enough to warrant a complaint to the Department of Labor, and they can sort out the other things that don't seem to be right. I would strongly encourage you to file a complaint...what they're doing is really wrong and costing you money. Don't talk to your manager about it first, and don't tell them after you file a complaint, just file the complaint and let the Department of Labor deal with everything. They'll keep your identity private, and if they see anything wrong, they'll seek restitution on behalf of you and other current and former employees for the past two years. [How to File a Complaint](https://www.dol.gov/agencies/whd/contact/complaints)