this post was submitted on 28 Jun 2023
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Tips are a way for service industry workers to avoid taxes. I wonder if there's any reliable statistics on how many workers in the service industry report their tips accurately to the IRS
I would respectfully disagree. There is an entire system for tracking tips: https://www.irs.gov/newsroom/tip-income-is-taxable-and-must-be-reported and https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting. For another, the whole tipping process was discovered by wealthy Americans:
In an ideal world, service industry workers would be paid a living wage, and there would be no tips required. That’s how it should be.
Ultimately, tips are a way for “owners" to avoid paying fair wages, using the customer base to subsidize the employee’s wages. I won’t even go into instances where the owners steal tips from their staff.
Do some people under-report tips? Probably. But will most service workers, who can barely afford to survive in this country, incur the risk of being audited by the IRS if they don’t report tips and get penalized thousands of dollars for their meager hundreds? I very much doubt it. And yes, the IRS does go after the little guy - a lot. It’s cheaper than going after rich people with lawyers.