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restaurant and could easily make $200-300 a night in tips. But, from that amount she would "tip out" based on her total food and beverage sales - the bartender would receive 4-5% and then usually 2-3% was divided between the food runners, seating hostess, cook, and bussers. Every restaurant has a set policy for the percentages to tip out, but if my daughter received good tips from patrons as a result of good service from the bartender and others, then she gave them more than the required percentage - basically giving a better tip for better service.

It used to be that people who worked in the service industry would report their minimum hourly wage and only a small portion of their cash tips to the IRS. Of course, tips that were indicated on debit and credit receipts were reported, but not the cash tips. The IRS got smart and realized that reported tips should coincide with total sales reported by the restaurant. Now the employee's W-2 form has "allocated tips" listed, which must be reported by employers and claimed as income by employees. But, there will never be a way to verify exactly how much a person makes in tips when they are given in cash.

I find it interesting that many occupations, which pay minimum wage and involve providing a service (e.g., fast food server, bank teller, store clerk, etc.), do not require tipping for their services. I wonder why we are tipping only certain service personnel? If the primary reason for tipping is to show our gratitude for good service, then why don't we just tip everyone who gives us good service and refrain from tipping those who don't?

References:
http://129.3. 20.41/eps/eh/papers/0309/03090 01.pdf
http://www.tip20.com/div /con/index.html

Learn more about this author, Sharon Lea Hill.
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