|How to Understand Income Tax for Food Servers in California|
|Written by Tracy Locricchio|
Intro: I have worked as a food server for years. When I moved to California I was amazed that I could make $8.25 per hour plus tips being a waitress! It sure beat the measly $2.25 Michigan waitress wage. I worked countless hours hoping to rack up a decent paycheck. All was well until I received my check. I was seriously disappointed. Here are some tips to help you understand how the California income tax system works.
DO NOT WORK MORE HOURS THAN YOU NEED TOO.
When you are are a waiter or waitress you will make your money on tips not hours. I was easily fooled by this. Instead work the hours you need to get the tips you need. As an experienced server, you will surely get the hang of this step quickly.
UNDERSTAND YOUR PAYCHECK AND DEDUCTIONS.
Let's say you work 60 hours this week and made $872 in tips. Wow sounds like a great week right? Not necessarily true. Uncle Sam will add your hourly earnings with your tips made together, THEN TAX YOU on that total. Problem is, after they tax you on that they subtract your tips that you have already earned. You walk home with cash in hand every day or night and you already probably spent those tips, but you paid taxes on that money. So when you get your check, it will be peanuts. There has even been cases of people having to pay their employers due to the high taxes taken out and low tips made.
CASH IS KING!
When people pay their tabs with a credit card, that information will be stored in the computer under your tax info. You will be fully taxed (15%) on all credit card tips. When you get a cash tip you will be able to claim the amount you want to be taxed on. No one will ever know how much cash was given to you as a tip. It is up to you to be an honest American and at least claim a fair amount. I recommend claiming 8 to 10%. This will help make up for the 15% you were taxed on by credit card tips when lets say they only left you a 5% tip.