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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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I am a tipped employee in a small local houston texas restaurant.

Customer Question

I am a tipped employee in a small local houston texas restaurant. My employer deducts credit card processing fees for our tips. The amount deducted is not consistent and is never itemized on my pay stub. I am just paid "net" tips with no accounting for the deductions. I know that deductions of this type are legal so long as the deduction does not exceed the employers actual cost of processing the tip. But legally shouldn't my pay stub be itemized so I know the cost being deducted from my tips?
Submitted: 6 months ago.
Category: Tax
Expert:  Lev replied 6 months ago.
From legal prospective - if income was not received - it may not be reported as paid on the pay stub.That is not withholding from your payment - but tip income received by your employer (via credit card) and never transferred to you.See here pay receipts or check stubs, otherwise known as "written statements of earnings", are not required for employees covered by the federal law known as the Fair Labor Standards Act (see sections 62.003 and 62.151 of the Texas Minimum Wage Act - the latter section exempts FLSA-covered employees from the Texas minimum wage laws, including the earning statement provision), it is nonetheless a very good idea to give employees such receipts or check stubs. For one thing, a receipt or check stub can help serve as one of the kinds of wage and hour records required under the FLSA's recordkeeping requirements. For another, giving employees proof of how their wages were computed, including deductions from wages, can help minimize complaints and suspicions on the part of employees about whether their wages were properly paid. The statement of earnings may be in either written or electronic form. If sent via e-mail, consider using some form of password ***** and/or encryption, since privacy and identity theft issues are becoming more critical all the time. If sent via regular mail, keep the recent law in mind that requires employers to give employees an annual reminder that they have the right to request the company not to print their Social Security number on any document sent through the mail (section 501.001(b) of the Texas Business & Commerce Code). Concerning cash wages, an employer should simply never, ever give wages in cash without at least getting a signed receipt from the employee showing that a certain amount of wages was paid in cash on a certain date. Failing to keep such documentation can expose an employer to a claim that wages were not paid at all..Another important aspect - is reporting income for tax purposes.Income is included into gross income for income tax purposes if Constructively received.Income is constructively received when an amount is credited to your account or made available to you without restriction. In your situation only a part of tip amount after credit card fees are deducted is constructively received - and ONLY that amount should be reported on W2 form and to the IRS.Questions?
Customer: replied 6 months ago.
If I am not being told what my gross tips are, how am I to know if my w 2 is reflective of my gross or net tips?
Expert:  Lev replied 6 months ago.
For tips paid directly to you - Employees must report tip income on Form 4070, Employee's Report of Tips to EmployerSo you know what you received and what you reported to your employer.
Expert:  Lev replied 6 months ago.
For tips paid directly to your employer - your employer keep track of amounts paid to you.So you should know what you are receiving.And that is recorded in Employee’s Daily Record of Tips - see page 3 is a separate column for Credit and debit card tips received by your employer on your behalf..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you will all tax related issues.

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