Feb

20

Tipping Cash? Tipping Credit Card?

February 20, 2008 |

Tip JarI have heard many people suggest that you should always leave your waitress tips in cash, as opposed to by credit card. This has been the topic of many after-dinner discussions while deciding how to split the check and what is the right amount to tip. For some people it is not a matter of significance, while for others, the decision to tip cash vs. credit seems to have religious significance. I have heard several reasons, along with my thoughts on them:

  • Cash tips are not reported in the W-2 forms and save the waitress money in taxes — Not necessarily true, sometimes, when the tips are not recorded, the restaurant owner has to estimate them. However, they usually estimate them on the low-side, saving some taxes to the waitress. I do not believe in willingly helping anybody commit tax fraud. I help people use lawful ways of reducing tax liability, but hiding earnings from Uncle Sam is fraud. Some people justify waitress tax fraud on the fact that they earn $2 an hour. Besides the fact that I do not justify fraud I have to point out that if they wait a single table of four for an hour and the table consumes $80 in food and beverage, they earn around $10 in tips. $12/hour is a better salary than a supermarket checkout person, who has to report all his/her earnings to Uncle Sam.
  • Credit Card Tips are Shared Among All Service Personnel - True in some restaurants, but usually not the case. But those restaurants also ask the cash tips to be placed in a common pot – if they pocket the tip cash, then they are breaking the agreement with their peers.
  • Credit Card Companies Charge Commissions on Tips - This one is probable true. Credit Card companies charge a commission on the charges you make on them. The restaurant owner may reduce the tip to cover the tip’s commission. I have read some articles that suggest that credit card users leave more tips than cash users, which may compensate.

I do pay as many expenses as I can with a charge card (debit card or credit card). I do it so that I can keep a perfect record of all of my expenses, and I can understand on which areas I have to adjust my spending. Tipping in cash would skew my spending analysis. It would also make it very complex to handle my business expenses accounting. I believe people should just leave the tip on the same method that they use to pay the meal. Don’t make your life more complex than it has to be.

(Originally posted in the Anes Weblog).

 


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