Economy "No taxes on Social Security, Overtime and tips" just passed

[avenue94]

What is so impossible about it? Service workers know who they are, the IRS knows who they are and the IRS knows lawyers are not them.

How would you define service workers or which jobs are exempted from income tax on tips?

The example you gave is funny because nothing is stopping you from doing that now. Why wait for a law to pass for you to do it? Let people pay you fuck all and then stiff you the way they do with waitstaff. You can wink wink nod nod all you want but a tip is not mandatory.

There's no point in doing it right now, tips are taxed like income is. There are other posters in this thread who can explain the legal side much better.

Tipped employees currently have a different MW (or used to, it was like $2.13 when I was a bartender in my 20's, not sure what it is now), and are only forced to declare 8% of their ticket sales as tips. So, however they determine who gets that lower MW and minimum tip declaration today I am guessing is the same way they'll handle the new tax exemption.

Not saying people won't find some loopholes, who knows, but I am guessing it is industry dependent.

It'd be pretty easy to classify income as tips for a lots of white collar jobs. Like I said, if you really want to help out low wage workers, use the EITC since it can be frontloaded (paid ahead of time) and it doesn't penalize moving into the next income ladder. It also helps out more workers, since most low wage workers aren't tipped and about a third of tipped workers don't even pay income tax.

 

[KeepingItReal]

Actually, we are service workers. The law is a service industry.

The problem is that most people tend to think of service workers as low wage workers. But doctors, lawyers, accountants, etc. are all service workers. They're just higher paid service workers. And they tend to be salaried because they are rarely tied to strict 40 hour work weeks. The nature of the work makes it very difficult for the employer to calculate the hours required on a weekly basis. A case, patient or tax filing might be particularly bad one week and next to nothing the next week. The employee gets the same money for down week as up weeks and the employer gets to avoid being hit with unexpected OT.

As for why no one takes their income in tips now? Because tips are still taxed as income and the employer still has to report them. So the employee gets no benefit from making the consumer pay a tip, just more paperwork, and there's no benefit to the employer since they still have to report how much income is being generated via tips and pay FICA on it.

More paperwork, no additional benefit.

Obviously, this changes if the income is tax free. A good modern example is carried interest in the finance world. Financiers try to get as much compensation as possible characterized as "carried interest" because it's taxed as long term capital gains which is a lower tax rate than ordinary income. To get this benefit, they defer the compensation long enough to meet the criteria. If the benefit didn't exist, they'd probably structure their compensation differently.

Brother, you can't "make" a consumer pay a tip. If they feel like it they will tip and if they don't, they won't. This boils down to the reason this won't effect lawyers, business consultants or any highly paid "services* provider, guaranteed income, especially when it's high income, is preferred to non guaranteed income.

 

[MDoza]

Cops are going to be putting in even more unnecessary overtime now

 

[panamaican]

Brother, you can't "make" a consumer pay a tip. If they feel like it they will tip and if they don't, they won't. This boils down to the reason this won't effect lawyers, business consultants or any highly paid "services* provider, guaranteed income, especially when it's high income, is preferred to non guaranteed income.

I don't think you're grasping how straightforward it is to simply reclassify income as a "tip".

And yes, you can make a consumer pay a tip. Many restaurants these days add a mandatory 15% or 20% tip on parties of 6 or more. It's become industry standard.

 

[KeepingItReal]

How would you define service workers or which jobs are exempted from income tax on tips?

There's no point in doing it right now, tips are taxed like income is. There are other posters in this thread who can explain the legal side much better.

It'd be pretty easy to classify income as tips for a lots of white collar jobs. Like I said, if you really want to help out low wage workers, use the EITC since it can be frontloaded (paid ahead of time) and it doesn't penalize moving into the next income ladder. It also helps out more workers, since most low wage workers aren't tipped and about a third of tipped workers don't even pay income tax.

The ones who are currently getting tips are "service" workers, the rest are not. So food delivery drivers, Uber/taxi drivers, waiters(except for ones that are paid salary, yes there are a few), bartenders. I might have missed a few but the IRS won't. This idea that people in highly paid professions would prefer to be paid a shit wage and maybe get tips because they are really suffering the taxes that much, is garbage nonsense.

 

[sickc0d3r]

t'd be pretty easy to classify income as tips for a lots of white collar jobs. Like I said, if you really want to help out low wage workers, use the EITC since it can be frontloaded (paid ahead of time) and it doesn't penalize moving into the next income ladder. It also helps out more workers, since most low wage workers aren't tipped and about a third of tipped workers don't even pay income tax.

Hey, you're preaching to the choir on EITC, I support increasing it, and I think it's about the best way we have to target lower incomes. Better than raising the MW, even.

But, if it's so easy to classify income as tips, why not do it now? You'd still pay a lower rate based on a much lower income tier, with no real way to enforce declaring those tips accurately. I am guessing it is because the "tip" only applies to certain industries. Maybe I am missing something.

 

[LangfordBarrow]

Democrats hatred of single mothers, waiters/waitresses and hard workers who put in those extra few hours per day confirmed

Not taxing overtime is retarded. Some people can double their income by working overtime to make hundreds of thousands per year. You really believe this is a better idea than to make sure people earn a living wage? Social Security and tips sounds good but the lose of revenue has to be filled somehow and seeing as Medicaid appears to be under attack it makes you wonder where the money will come from.

 

[avenue94]

The ones who are currently getting tips are "service" workers, the rest are not. So food delivery drivers, Uber/taxi drivers, waiters(except for ones that are paid salary, yes there are a few), bartenders. I might have missed a few but the IRS won't.

OK, so write out how you want the IRS to define service workers. Job titles are meaningless, you'd have to define all those jobs. Those categories also not exclusive of each other or white collar work.

This idea that people in highly paid professions would prefer to be paid a shit wage and maybe get tips because they are really suffering the taxes that much, is garbage nonsense.

There are plenty of ways to near guarantee tips without falling afoul of the law. For example, let's say I'm a lawyer on retainer. The understanding would be that you pay a base fee, and then have the option to tip, with the latter providing an idea of how hard I'll work for you or how many hours I'll spend. Same for consultants and plenty of other high-income jobs.

 

[avenue94]

But, if it's so easy to classify income as tips, why not do it now? You'd still pay a lower rate based on a much lower income tier, and no real way to enforce declaring those tips accurately. I am guessing it is because the "tip" only applies to certain industries. Maybe I am missing something.

Because it's not worth the hassle. How do you think the effective tax rates for tips vs wages lines up?

 

[Osculater]

Tipped employees currently have a different MW (or used to, it was like $2.13 when I was a bartender in my 20's, not sure what it is now), and are only forced to declare 8% of their ticket sales as tips. So, however they determine who gets that lower MW and minimum tip declaration today I am guessing is the same way they'll handle the new tax exemption.

Not saying people won't find some loopholes, who knows, but I am guessing it is industry dependent.

Depends on which states

 

[Osculater]

Cops are going to be putting in even more unnecessary overtime now

NYPD, baby!

I hope they are hiring

 

[KeepingItReal]

OK, so write out how you want the IRS to define service workers. Job titles are meaningless, you'd have to define all those jobs. Those categories also not exclusive of each other or white collar work.

There are plenty of ways to near guarantee tips without falling afoul of the law. For example, let's say I'm a lawyer on retainer. The understanding would be that you pay a base fee, and then have the option to tip, with the latter providing an idea of how hard I'll work for you or how many hours I'll spend. Same for consultants and plenty of other high-income jobs.

I don't want them to do anything, but they are anyways going to do it. Just to entertain you I'll make it every simple, if you earn less than the untipped worker minimum wage, you qualify to be untaxed. So go ahead be a lawyer at $7 an hour. Let's see how well you do.

Yes there are, and none of them work, certainly not for highly paid professions. The option to tip, implies that there is the option not to tip. A lawyer can't afford $0 tips on cases because a case can take months or even longer. A waiter can afford a few $0 tips because he might have 40+ guests in a shift.

The funny thing about this is, almost everyone agrees that the tip system sucks. So you're telling me that someone who is in functioning in a pretty good but flawed system(getting a high salary and paying a pretty high tax rate) is going to go to a much shittier system, just to avoid taxes. I don't buy this for a minute.

 

[avenue94]

Yes there are, and none of them work, certainly not for highly paid professions. The option to tip, implies that there is the option not to tip. A lawyer can't afford $0 tips on cases because a case can take months or even longer. A waiter can afford a few $0 tips because he might have 40+ guests in a shift.

Which is why you would do it upfront during the consultation, not after you've worked on the case. "Here's my rate, here's the tip options, thanks for telling me about your case, I'll go back and think about whether or not I'll take it and get back to you."

You act like handshake agreements are still not common in nearly every career.

 

[sickc0d3r]

Because it's not worth the hassle. How do you think the effective tax rates for tips vs wages lines up?

No clue. But tips are much easier to hide than salaries or fees charged by an attorney or whatever. I'm just not buying that what you do for a living isn't going to matter when it comes to how they will determine if you qualify as a "tipped" employee.

 

[sickc0d3r]

Depends on which states

Yes that's true. Also depends on industry, like I don't think a tour guide would have the same rules governing wages as a waiter.

 

[KeepingItReal]

Which is why you would do it upfront during the consultation, not after you've worked on the case. "Here's my rate, here's the tip options, thanks for telling me about your case, I'll go back and think about whether or not I'll take it and get back to you."

You act like handshake agreements are still not common in nearly every career.

That's not how tips work, tips are paid after a service has already been provided.

You can have a handshake agreement, you can have an ironclad contract and you can still get screwed. Once again, you have no incentive to change your way of doing business other than "I might pay less tax and get away with it" Yes you might, you might also not.

 

[KeepingItReal]

I don't think you're grasping how straightforward it is to simply reclassify income as a "tip".

And yes, you can make a consumer pay a tip. Many restaurants these days add a mandatory 15% or 20% tip on parties of 6 or more. It's become industry standard.

Yeah, good luck with that, the IRS is pretty clear about what constitutes a tip and what doesn't.

That's called a gratuity, and the IRS deems that as a service charge, its treated differently than a tip.

 

[avenue94]

No clue. But tips are much easier to hide than salaries or fees charged by an attorney or whatever. I'm just not buying that what you do for a living isn't going to matter when it comes to how they will determine if you qualify as a "tipped" employee.

Well yeah...that's why people tend not to report or underreport their tips. Tips are taxed at the same rate as income, so there's no benefit to classifying wages as tips right now. That changes drastically if tips are exempt from income tax.

There is an entire cottage industry dedicated to finding tax loopholes. Don't think for a second that they won't find huge ones in a lazily written GOP bill.

That's not how tips work, tips are paid after a service has already been provided.

Yes, and I'll claim that the tips were for the consultation and completely unrelated to the minor retaining fee for services I rendered after.

You can have a handshake agreement, you can have an ironclad contract and you can still get screwed. Once again, you have no incentive to change your way of doing business other than "I might pay less tax and get away with it" Yes you might, you might also not.

Have you ever worked as a non W-2 employee, specifically in professional services?

 

[KeepingItReal]

Well yeah...that's why people tend not to report or underreport their tips. Tips are taxed at the same rate as income, so there's no benefit to classifying wages as tips right now. That changes drastically if tips are exempt from income tax.

There is an entire cottage industry dedicated to finding tax loopholes. Don't think for a second that they won't find huge ones in a lazily written GOP bill.

Yes, and I'll claim that the tips were for the consultation and completely unrelated to the minor retaining fee for services I rendered after.

Have you ever worked as a non W-2 employee, specifically in professional services?

You can claim anything, and risk opening yourself up for criminal investigation. All this to go from being a well paid employee in order to be $7/hour + tips worker, so you can pay less tax? Wow sounds like a brilliant plan. Go for it!

 

[avenue94]

You can claim anything, and risk opening yourself up for criminal investigation. All this to go from being a well paid employee in order to be $7/hour + tips worker, so you can pay less tax? Wow sounds like a brilliant plan. Go for it!

And yet we routinely see folks not report income (hello small businesses with lots of cash spending, and those who get tips), stretch and abuse write offs, etc.

And you act like claiming tips means setting your hourly wages at 7 bucks lol. Did they not teach you about the numbers between 7 and infinity?

If people aren't willing to shift their compensation into lower-taxed forms, then why do finance bros dream of working in jobs where they get carried interest?