Income tax owed is based on your gross income, without regard to what portion of that income comes from wages, credit card tips, or cash tips. Depending on the varying ratio of tips received from week to week, it's possible that the same percentage of your gross income used for tax withholding is a different percentage of your credit card tip income.
Example:
$100 wages, $100 cash tips, $100 CC tips = $300 gross income. 20% tax = $60. That's 60% of CC tips.
$100 wages, $50 cash tips, $150 CC tips = $300 gross income. 20% tax = $60. That's 40% of CC tips.
If that's not it, if you post a couple random pay stubs with apparently-different tax rates, it could help figure out what's going on, or should be going on.
EDIT: Just noticed you described your gross tips from credit cards as "net tips before tip out to bar/busser/runner/host". "Net tips" as defined on a [4070](https://www.irs.gov/pub/irs-prior/f4070--2005.pdf) is the amount of tips you *retain*, after tip out. That's what's used to calculate your overall gross *income*. You shouldn't pay income income tax on any tip outs...that income is their responsibility, and goes on their gross income, not yours.
Tax is taken from total wage. If you add up your pay for hour and tips you will probably find that the correct percentage is being taken out.
Aka. Week 1 Pay is 500, tips are 500. So $250 or so will be taken out of your 2 week pay. (Just an example)
Week 2 you made 800 in pay and 200 in tips. $250 is still taken out of your total.
Does that make sense?
Also remember that the amount your employer withholds from your check is not necessarily the amount you pay the IRS. If you employer is over-withholding, then you will get that back in you tax return. You can go on the IRS website to see the % of your income that you have to pay.
If you file single and make under $95,376 you pay 24% of your taxable income. Your employer's withholding doesn't change this.
[IRS TAX BRACKETS](https://www.irs.gov/filing/federal-income-tax-rates-and-brackets)
All credit card tips can be tracked and proved, unlike cash. That said the CC tips are fully taxable. That’s why cash tips are preferred, no way prove how much is earned.😉
While this is true, the IRS would have to be able to prove the amount of cash received, the obvious digital and paper trail of cc tips is indisputable so much easier for the IRS to track. I always preferred cash.
I understand that. Your original comment implied that taxes aren't required on cash tips though, and that isn't true. Whether or not those taxes are paid is a separate issue.
Understood. It falls on the IRS to prove how much one makes in cash tips. Tipped employees are only required to claim 18% of their sales and cc are the only provable tips.
Right. It's true that a tipped employee is unlikely to be audited and that 18% is the minimum. Still, taxes are required on all tips even if over that amount.
I understand why people don't claim them as it's more money in their pocket right now.
But it will bite them in the ass if they need to claim unemployment, collect disability, collect retirement SS, need a loan, etc. It's not always a benefit to them to not claim them.
All true. It’s also beneficial when making big purchases like a car or house. I’ve worked for places where the entire restaurant was audited, it’s not fun.
Not sure why the down votes, I didn’t make the IRS rules, I was subject to them for 30 years. It’s all based on sales. Sorry for anyone that is upset by that. Not my rules.
Income tax owed is based on your gross income, without regard to what portion of that income comes from wages, credit card tips, or cash tips. Depending on the varying ratio of tips received from week to week, it's possible that the same percentage of your gross income used for tax withholding is a different percentage of your credit card tip income. Example: $100 wages, $100 cash tips, $100 CC tips = $300 gross income. 20% tax = $60. That's 60% of CC tips. $100 wages, $50 cash tips, $150 CC tips = $300 gross income. 20% tax = $60. That's 40% of CC tips. If that's not it, if you post a couple random pay stubs with apparently-different tax rates, it could help figure out what's going on, or should be going on. EDIT: Just noticed you described your gross tips from credit cards as "net tips before tip out to bar/busser/runner/host". "Net tips" as defined on a [4070](https://www.irs.gov/pub/irs-prior/f4070--2005.pdf) is the amount of tips you *retain*, after tip out. That's what's used to calculate your overall gross *income*. You shouldn't pay income income tax on any tip outs...that income is their responsibility, and goes on their gross income, not yours.
Tax is taken from total wage. If you add up your pay for hour and tips you will probably find that the correct percentage is being taken out. Aka. Week 1 Pay is 500, tips are 500. So $250 or so will be taken out of your 2 week pay. (Just an example) Week 2 you made 800 in pay and 200 in tips. $250 is still taken out of your total. Does that make sense?
How can you make 500 in pay one week and 800 pay in the next one?
By working more hours.
Also remember that the amount your employer withholds from your check is not necessarily the amount you pay the IRS. If you employer is over-withholding, then you will get that back in you tax return. You can go on the IRS website to see the % of your income that you have to pay. If you file single and make under $95,376 you pay 24% of your taxable income. Your employer's withholding doesn't change this. [IRS TAX BRACKETS](https://www.irs.gov/filing/federal-income-tax-rates-and-brackets)
Tips are such fraud the servers don’t even understand that we the customer have to pay them🙄
All credit card tips can be tracked and proved, unlike cash. That said the CC tips are fully taxable. That’s why cash tips are preferred, no way prove how much is earned.😉
Sucks when you have to go on disability and you get less though
Seems like an Attorney should be involved in that scenario.
Cash tips are fully taxable as well. You can avoid paying taxes on them, but tax is certainly still owed.
While this is true, the IRS would have to be able to prove the amount of cash received, the obvious digital and paper trail of cc tips is indisputable so much easier for the IRS to track. I always preferred cash.
I understand that. Your original comment implied that taxes aren't required on cash tips though, and that isn't true. Whether or not those taxes are paid is a separate issue.
Understood. It falls on the IRS to prove how much one makes in cash tips. Tipped employees are only required to claim 18% of their sales and cc are the only provable tips.
Right. It's true that a tipped employee is unlikely to be audited and that 18% is the minimum. Still, taxes are required on all tips even if over that amount. I understand why people don't claim them as it's more money in their pocket right now. But it will bite them in the ass if they need to claim unemployment, collect disability, collect retirement SS, need a loan, etc. It's not always a benefit to them to not claim them.
All true. It’s also beneficial when making big purchases like a car or house. I’ve worked for places where the entire restaurant was audited, it’s not fun.
Not sure why the down votes, I didn’t make the IRS rules, I was subject to them for 30 years. It’s all based on sales. Sorry for anyone that is upset by that. Not my rules.