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top of a dollar(s), and the customer has told the server the service was excellent.

In most restaurants, servers are asked to "tip out" from their tips to bus persons, expeditors, bartenders, chefs, etc. And, just as service sets the percentage a customer tips the server, the help the server receives from their "team" should set the percentage for tipping out. The server can use the restaurants par for each department if they have one.

When it comes time for servers to tip the IRS, here's the rule. The IRS uses an 8% of sales allocation (there are some exceptions) as a guideline for reporting tip income. But, the rule is that ALL actual tip income is to be reported. Reconciling unreported tip income at the end of the year is done through forms 1040 and 4137. Form 1040 calculates any additional federal tax due. Form 4137 calculates the amount of Social Security and Medicare tax due on unreported tipped income.

Overall, there is no absolute amount or law about tipping. But, it is customary and heavily relied upon for income for those in the tipping industry. As a customer, just be sure you don't suddenly decide good service went bad when it comes time to leaving the tip.

Resources: My 15 years experience in the restaurant industry. My past experience as a tax preparer, and IRS.gov

Learn more about this author, Dori Beldi.
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