RESTAURANT TEAM MEMBER HANDBOOK - EthicsPoint

Keep a daily log.
This can be a book that is provided by the IRS or a calendar or notebook that
you maintain. This will be extremely critical if the IRS should ever audit
you. The daily record log must show your cash tips, your charge tips and the
amount of tips you get from other team members and/or amount you “tip
out” to other team members (which helps prove that you don’t owe taxes on
these tips). In your records of “tip outs,” it is important to write down the
first and last names of the persons whom you tipped so that you can prove
that you don’t owe money on those tips. The law requires you, and all
taxpayers, to keep sufficient records to determine income. The records may
be your ONLY defense in the case of being audited.
Understand the benefits of reporting your tips.
By reporting your tips, you do the following:
• Comply with the law which requires you to report 100% of your tips
• Increase the Social Security earnings for which you should ultimately be
eligible
• Trigger higher unemployment benefits if you become unemployed
• Improve your credit rating based off your higher income
• Increase your chances of qualifying for car or home loans based on your
higher income
• Avoid penalties that occur for not correctly reporting
• Avoid back taxes on unreported income and FICA
• Avoid 50% FICA penalty for late reporting
• Avoid potential 20% income tax penalty for failure to report
• Avoid interest on money owed to the IRS
• Avoid estimated tax penalties
Understand how the IRS estimates what tips you received.
The IRS can take an estimate from the average tips of credit cards and
“assume” the cash tips to be equal. We are required to give the IRS
information on total restaurant sales, a total tip team member report and total
tips left on charges. If our charge tips show 16% and the cash tips show 5%,
the IRS may have good reason to think you are under reporting. In addition,
the IRS is also allowed to interview team members, observe customers’
tipping habits, and look at team member records to reconstruct tips.
Understand what happens if your paycheck is not big enough to cover all the
taxes that should be withheld.
This can happen. When BJ’s withholds taxes from your wages, the
withholding is based on both your hourly wages and your reported tips.
Sometimes your pay may not be enough to cover all the necessary taxes and
deductions. In these cases it’s most important to be aware that you may owe
more taxes that you expected when you file your tax returns. Some tip-
Confidential and Proprietary 49
January 2012