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yet another thread on tipping in the diner


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#1 willem

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Posted 02 December 2017 - 12:00 PM

Why would I inflict this topic on the good people of AU? Well, because I came across an assertion that I had not seen before. On FlyerTalk, there is a discussion of train travel that morphed into a discussion of tipping. The first quote is from post #17 in the thread.
 

The dining car workers are classified by the IRS as tipped employees who automatically are taxed on a percentage of the bill that the IRS presumes is their tip. So, if you stiff them, it's adding insult to injury--they are actually paying out of pocket for the privilege of serving you!)

 
The second quote is from post #27, where I believe the above link will open the thread.
 

What I was referring to in my post is that large employers with tippable food service employees (Amtrak certainly qualifies) are required to impute 8 % of the gross food service sales as tips and report that amount both on the employee’s W2 form (in Box 8) and to the IRS.


Can anyone confirm or refute the assertion that Amtrak dining car employees are required to report imputed tips? What about sleeping car attendants?

 



#2 fixj

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Posted 02 December 2017 - 12:17 PM

I can’t speak for Amtrak, but my experience in running restaurants for Hilton and other hotels for over 30 years was that the 8% rule only applied to employees making less that the minimum wage (currently 7.25) or tipped employees making the tip minimum wage (currently 2.13). 



#3 OBS

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Posted 02 December 2017 - 12:40 PM

The mandatory application does not apply to sleeping cars. Not sure how waiters are handled, however all employees are required by law to report any tipped income and a spot is provided on timesheets for this declaration.....



#4 Lonestar648

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Posted 02 December 2017 - 01:35 PM

Do the DC Servers have to turn in their tips and/or do they pool their tips.  Many restaurants require tips to be counted then turned in at the end of the shift. 



#5 the_traveler

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Posted 02 December 2017 - 02:02 PM

In my past life as an IRS Tax Auditor, I did not work in an Amtrak crew base city so I can not answer that specifically. However, I did work for a time in Nevada.

Casino workers had to report their tip income. Yes, that included servers in the restaurants and buffets. But it also included dealers at the tables - and I am sure that they make more then the minimum wage!
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#6 TiBike

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Posted 02 December 2017 - 03:07 PM

Casino workers had to report their tip income. Yes, that included servers in the restaurants and buffets. But it also included dealers at the tables - and I am sure that they make more then the minimum wage!

 

Do you recall what the requirement was for employers' imputing of tip income? Was it for any "tipped" employee in any industry, or just in certain cases?


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#7 Ryan

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Posted 02 December 2017 - 03:11 PM

IRS pub 531 tells you everything you need to know and more.

https://www.irs.gov/publications/p531

If you receive a tip, the IRS counts that as income and wants their cut.
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#8 the_traveler

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Posted 02 December 2017 - 03:26 PM

It was around 20 years ago when I worked in NV, so I can not recall fully. I do remember seeing servers and dealers, but I can not remember if I saw positions like bellman or valets.

Also, the rates differed on the property and shift. These are not the rates, but a big name hotel (like Caeser’s Palace) in the evening might have an hourly tip rate for dealers something like $20, while a neighborhood casino (like Joe’s Escape) may have a daytime dealer tip rate like $0.35 or so.
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#9 TiBike

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Posted 02 December 2017 - 03:42 PM

Thanks, Ryan. That link led to IRS Form 8027, which is the form filed by employers who are required to "allocate" tips, and the instructions for that form state:

 

"You must file Form 8027 if you're an employer who operates a large food or beverage establishment. A large food or beverage establishment is a food or beverage operation: That is located in the 50 states or in the District of Columbia, Where tipping of food or beverage employees by customers is customary, and Whose employer normally employed more than 10 employees on a typical business day during the preceding calendar year. We call this the 10-employee test.

 

"A food or beverage operation is any business activity which provides food or beverages for consumption on the premises, other than fast food operations. An operation is a fast food operation only if its customers order, pick up, and pay for food or beverages at a counter or window and then carry the food or beverages to another location (either on or off the premises). Some people call food or beverage operations venues, stores, rooms, outlets, or cost centers.

 

"If you provide food or beverages at more than one location, the activity at each separate location is considered to be a separate food or beverage operation and a separate Form 8027 is filed for each location.  You could also have more than one food or beverage operation within a single building. Each activity conducted within a single building is treated as a separate location if the customers of the activity, while being provided with food or beverages, occupy an area separate from that occupied by customers of other activities and the gross receipts from the activity are recorded separately. For example, a gourmet restaurant, a coffee shop, and a cocktail lounge in a hotel would each be treated as a separate food or beverage operation if gross receipts from each activity are recorded separately."

 

And...

 

"You must consider the following when completing the worksheet.

 

"• Include employees at all of your food or beverage operations, even if an individual operation has fewer than 10 employees.

 

"• Include all employees at your food or beverage operations, not just food or beverage employees.

 

"• Don't include employees at fast food operations.

 

"• Don't apply the 10-employee test separately to each food or beverage operation.

 

So, the way I'm reading this:

 

- Tips are allocated for "food and beverage operations", which can be sub-units of a larger operation.

 

- Tips are only allocated for people working in food and beverage operations, not for co-workers who work in sub-units of the same company that are non-food and beverage operations.

 

- A "fast food" operation is not included, which is essentially one where you buy food at a counter and walk away with it – McDonalds or 7-11, for example.

 

- An Amtrak dining car is a food operation, the Pacific Parlour car is a beverage operation, cafe cars are a fast food operation, everything else is a non-food and beverage operation.

 

By that logic, dining car and PPC staff would be subject to allocated tips, but no one else (ignoring for the moment the grey area of sleeping car and coach attendants who bring food to passengers).

 

That's my hypothesis, anyway. Anyone have any actual facts to test it with?


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#10 OBS

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Posted 02 December 2017 - 06:42 PM

Do the DC Servers have to turn in their tips and/or do they pool their tips.  Many restaurants require tips to be counted then turned in at the end of the shift. 

neither...



#11 bratkinson

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Posted 02 December 2017 - 08:19 PM

 

"If you provide food or beverages at more than one location, the activity at each separate location is considered to be a separate food or beverage operation and a separate Form 8027 is filed for each location. 

 

I interpret the quote from the IRS form to mean that Amtrak would have to say 'this location on train #1', 'the next location 1 foot from the previous location', 'the next location 1 foot from the previous location', ad infinitum.  The paperwork alone would be a mountain!  And, of course, IRS would scream bloody murder!  Food trucks would have the same problem!   I wonder if they take pennies as tax payments? 


Edited by bratkinson, 02 December 2017 - 08:20 PM.


#12 willem

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Posted 03 December 2017 - 06:28 PM

Thank you to Ryan for the pointer to the IRS publication and especially to TiBike for the pointer to the IRS form and analysis of the instructions. Ryan, I think you skirted the issue. Of course the IRS wants its cut, but the question in the original post was whether the IRS would assume the employee received tips and not if the employee is legally required to declare the tips. Based on TiBike's analysis of the instructions, it would seem so, as asserted in the quotation in the original post.

 

It's food for thought. My next question is how the "free" meals that Amtrak provides to sleeping car passengers are valued. Yes, there is a menu price, but certainly I don't pay anything for the meal after I've been served, which is when the cost is usually established. In other words, does Amtrak allocate 8% of the menu price, 8% of the bill presented at the table, or some other amount?



#13 Lonestar648

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Posted 03 December 2017 - 07:18 PM

Technically, Amtrak should be including the value of the meals over what the IRS considered would be spent to eat at home.  When I was traveling, the IRS slammed our company for not adding this percentage of the meals charged while traveling.  So at the end of the year, your tax statement had the addition of the meals and IRS % use of the company car since we took the car home.  Since neither of these had any withholding dollars, you had to budget for paying the tax on this (I traveled 40-45 weeks a year).  In the end, the company eliminated company cars and started only reimbursing the approved IRS meal amount, about $10 per day, the rest was on us.  When entertaining a customer, the IRS started prohibiting alcohol including beer and wine, so that was out of our pockets.  The company also started reimbursing only a percentage of the hotel room for fear the IRS would slam them on this.  

 

Now, how is the SCA who doubles as the SCA and as a DC server get handled?  What about the LSA who either seats someone or sits at the table, are they expected to receive a percentage of tips?  The whole tips, meals, accommodations and the IRS is quagmire for everyone.



#14 caravanman

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Posted 03 December 2017 - 09:34 PM

Why worry about tips and tax, etc? Just leave a few $ tip for each meal, unless there is a problem with your server.  Tipping seems so much part of the American expectation, for such service...

 

Ed.



#15 Lonestar648

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Posted 04 December 2017 - 12:13 AM

I agree, avoid the stress, just plan to tip a few dollars.  They appreciate it and remember you.  I even get a $20 converted into $1's before my trip.  Many work hard and tipping food service at sit down venues is the american custom.  Enjoy the trip.



#16 Skyline

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Posted 04 December 2017 - 12:28 AM

Why worry about tips and tax, etc? Just leave a few $ tip for each meal, unless there is a problem with your server.  Tipping seems so much part of the American expectation, for such service...

 

Ed.

 

 

Agree. Even tho I don't get charged (in the DC) for my meals, as they are figured into the cost of my sleeper, I feel it would be unfair to "stick it" to the hard working servers. They don't receive any tip $$$ from the meal portion extra cost of my sleeper. So it's up to me to tip them.

 

I tip the usual 15% to 20% based on the menu cost for coach passengers for the meal I chose from the menu.



#17 cirdan

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Posted 04 December 2017 - 07:38 AM

Thank you to Ryan for the pointer to the IRS publication and especially to TiBike for the pointer to the IRS form and analysis of the instructions. Ryan, I think you skirted the issue. Of course the IRS wants its cut, but the question in the original post was whether the IRS would assume the employee received tips and not if the employee is legally required to declare the tips. Based on TiBike's analysis of the instructions, it would seem so, as asserted in the quotation in the original post.

 

It's food for thought. My next question is how the "free" meals that Amtrak provides to sleeping car passengers are valued. Yes, there is a menu price, but certainly I don't pay anything for the meal after I've been served, which is when the cost is usually established. In other words, does Amtrak allocate 8% of the menu price, 8% of the bill presented at the table, or some other amount?

 

Shouldn't the actual price payed be what counts? In this case zero.

 

Suppose an eatery does a two for one offer. Would those meals then be valued at the regular price or the two for one price?

 

What about if a restaurant offers free refills. Should they chalk up the value of those free drinks nevertheless?

 

I think what the business actually receives is the price that counts, not some fictive numbers printed onto the menu card to create the impression that somebody is getting something for nothing.



#18 PVD

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Posted 04 December 2017 - 08:32 AM

There are specific directions for "large food or beverage establishments"

 

Employers Who Operate Large Food or Beverage Establishments

File Form 8027
An employer who operates a "large food or beverage establishment" must file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, to make an annual report to the IRS for their receipts from food and beverages and tips employees reported to the employer. In addition, employers use Form 8027 to determine allocated tips for tipped employees. As an employer, you must file a Form 8027 for each large food or beverage establishment. Thus, many employers are required to file multiple Forms 8027.

A food or beverage operation is a large food or beverage establishment if all of the following apply:

Food or beverage operation is located in the 50 states or in the District of Columbia.
Food or beverages are provided for consumption on the premises (other than fast food operations).
Tipping of food or beverage employees by customers is a customary practice.
Employer normally employed more than 10 employees on a typical business day during the preceding calendar year. See the Instructions for Form 8027, to determine if you had more than 10 employees on a typical business day.
Allocating Tips
If the total tips reported by all employees at a large food or beverage establishment are less than 8 percent of the gross receipts (or a lower rate approved by the IRS), the employer must allocate the difference among the employees who receive tips. These "allocated tips" are computed and reported on Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Employers show allocated tips on the employee's Form W-2, Wage and Tax Statement, in the box titled "Allocated tips." No income tax, social security or Medicare taxes are withheld on allocated tips.



#19 AmtrakBlue

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Posted 04 December 2017 - 08:38 AM

Thank you to Ryan for the pointer to the IRS publication and especially to TiBike for the pointer to the IRS form and analysis of the instructions. Ryan, I think you skirted the issue. Of course the IRS wants its cut, but the question in the original post was whether the IRS would assume the employee received tips and not if the employee is legally required to declare the tips. Based on TiBike's analysis of the instructions, it would seem so, as asserted in the quotation in the original post.
 
It's food for thought. My next question is how the "free" meals that Amtrak provides to sleeping car passengers are valued. Yes, there is a menu price, but certainly I don't pay anything for the meal after I've been served, which is when the cost is usually established. In other words, does Amtrak allocate 8% of the menu price, 8% of the bill presented at the table, or some other amount?

 
Shouldn't the actual price payed be what counts? In this case zero.
 
Suppose an eatery does a two for one offer. Would those meals then be valued at the regular price or the two for one price?
 
What about if a restaurant offers free refills. Should they chalk up the value of those free drinks nevertheless?
 
I think what the business actually receives is the price that counts, not some fictive numbers printed onto the menu card to create the impression that somebody is getting something for nothing.
I have tipped on the full price of a meal that I used a coupon for. I figured the staff was doing the same duties for the discounted meal as s/he would have done if I paid full price.
Now, if the restaurant is offering two for one or free refill, I tip on the cost shown on my bill.


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#20 Ziv

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Posted 04 December 2017 - 08:47 AM

I hear you Cirdan, but the dining car meals aren't free, they are priced into the sleeper accommodation price. But even if you consider them to be "free", you should still tip as if they weren't.  Say you take your girl out for a couple glasses of wine. $8 each and you both have two and are ready to roll out but the waitress comps a couple glasses so that you can try this great Chilean white. You should tip like you paid for 6 glasses, not 4. So your math with regards to the tip isn't 20% of $32 for $6.50 tip, it is 20% of $48 for a $9.60 tip even though the bill is for $32 and tax. You don't pay for the comp'ed glasses but you do tip for them. I guarantee that you will get a lot more comp'ed glasses of wine if you follow this rule, and you will feel better about the waitress and she remembers the thought.

Same thing if a waiter comps your wife's entre for her Birthday, you tip as if the entre was still in the bill since the server comp'ed it and did all the work associated with bringing it to the table.

In an Amtrak dining car the logical thing is to tip according to the menu price. Maybe you don't tip 20%, but 15% of an Amtrak meal is not a lot of money and it conveys the thought that you appreciate the service. It doesn't take too many people not tipping to ruin a tipped employees day. It isn't just the money, it is the perceived lack of courtesy. Tipping certain positions is the norm in the US.  I hesitate to use the word, but it sums up the tipped persons point of view.  Don't stiff a tipped employee unless they did a poor job.

Even when things go wrong that are out of the control of the wait staff, you should still tip something if they tried. 

My Dad told me something one time when we were at a cafe in Shelby Montana. The waitress wasn't doing all that good a job, she was forgetting stuff but she was trying. The people at the table next to us were kind of sharp with her, so my Dad just smiled at her and told her to take her time with our order. She got a good, not great, tip from my Dad.  As we left, my Dad said, "Son, you can tell a lot about a man by the way he treats a bad waitress or an ugly dog."  As we travel, as we go through life, there are going to be a lot of bad waitresses and ugly dogs, and if they are trying, they are worth acknowledging and thanking, even if they aren't the best. We all start somewhere.

Sorry for the sermon. But this means something to me.

 

 

 

Thank you to Ryan for the pointer to the IRS publication and especially to TiBike for the pointer to the IRS form and analysis of the instructions. Ryan, I think you skirted the issue. Of course the IRS wants its cut, but the question in the original post was whether the IRS would assume the employee received tips and not if the employee is legally required to declare the tips. Based on TiBike's analysis of the instructions, it would seem so, as asserted in the quotation in the original post.

 

It's food for thought. My next question is how the "free" meals that Amtrak provides to sleeping car passengers are valued. Yes, there is a menu price, but certainly I don't pay anything for the meal after I've been served, which is when the cost is usually established. In other words, does Amtrak allocate 8% of the menu price, 8% of the bill presented at the table, or some other amount?

 

Shouldn't the actual price payed be what counts? In this case zero.

 

Suppose an eatery does a two for one offer. Would those meals then be valued at the regular price or the two for one price?

 

What about if a restaurant offers free refills. Should they chalk up the value of those free drinks nevertheless?

 

I think what the business actually receives is the price that counts, not some fictive numbers printed onto the menu card to create the impression that somebody is getting something for nothing.

 


Edited by Ziv, 04 December 2017 - 09:03 AM.





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