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BR Tax Group - Accounting Firm

Tax Deductions for Restaurant Service Staff

Keeping a Good Tip Record:
If you are a waiter or waitress, the IRS requires you to keep a record of your tips. The record needs to include tips you receive from:

  • your customers in cash; 
  • other tipped employees because of a “tip-sharing” arrangement; and 
  • your customers who pay by credit card. 
When you receive a tip but pay part of it to someone else (for example, a bartender), you should note the name of that person in your tip record along with the amount you paid him/her. You should keep your record updated on a day-to-day basis to make sure of its accuracy.

Reporting Tips to Your Employer:
In order to comply with IRS rules, you need to let your employer know the total amount of tips you receive. This reporting should be done in writing within the 10-day period following the end of the month in which you receive the tips (sometimes the due date is extended a day or so if the last day of the 10-day period is on a weekend or legal holiday).

Once you make the report to your employer, he/she adds the amount to your regular wages and uses the total to figure how much income tax, Social Security tax and Medicare tax to withhold from your regular paycheck.

Tips Not Reported to Your Employer:


Special rules apply to tips you received but didn’t, for one reason or another, report to your employer. If such tips total $20 or more in any given month while working for one employer, you will need to figure your own Social Security and Medicare taxes for them. These taxes are computed and paid with your tax return. Keep in mind that the IRS can also charge a penalty for tips that aren’t reported to an employer.

Keeping Tip Records:
According to the rules, your tip records need to clearly establish the tips you received. That’s why a timely, day-to-day record is so important. The form included below contains all the information you will need and has room for an entire month’s entries. You may make as many copies of the form as you need so that you will have a permanent record of your tips for the entire year.

Important:
For Federal purposes, the expenses included in this brochure are no longer deductible after 2017 and generally through 2025 as a result of tax reform (TCJA). However, not all states conformed to TCJA and these items may still be deductible on your state tax return.


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“Bernard and his team at BR tax group are top notch. This is my first year using them after switching from a different local CPA and I didn't realize how much tax info I've been missing. His communication is great. The additional information he provides to maximize tax savings is something I didn't get from my previous CPA. Thanks Bernard”

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Frequently Asked Questions

You can prepare your taxes yourself, especially if your business is simple.

But once you have contractors, employees, business loans, equipment purchases, mileage, mixed expenses, or growing revenue, things get more complex. At that point, tax preparation becomes a way to make sure your business is reported correctly, your deductions are handled properly, and your records can support what you file.

Send anything that shows what your business earned, spent, bought, paid, borrowed, or changed during the year.

That usually means your income records, bank statements, credit card statements, payroll reports, contractor payments, loan documents, mileage records, and prior-year tax return. Also tell me about anything unusual, such as buying a vehicle, hiring someone, opening a new location, or taking out a business loan.

Messy books can slow things down. If expenses are in the wrong categories, transactions are missing, or personal and business spending are mixed together, your tax return may not show the right profit. We may need to clean things up before filing, so your return is accurate and easier to support.

Possibly, if it was truly for your business and you have proof.

Still, it is much better to avoid this when you can. A separate business bank account and business credit card make everything cleaner. They save time, reduce confusion, and make your records much easier to defend if anyone ever asks questions.

Most small business owners can deduct ordinary business expenses like software, advertising, supplies, insurance, rent, payroll, contractor payments, professional fees, travel, and some vehicle costs.

The question I usually ask is simple. Was this expense clearly for the business? If yes, we can look at how it should be handled. Personal expenses should stay personal.

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