August 24, 2007, Newsletter Issue #90: Tips & Taxes
Tip of the Week
My experience is that there is no income which doesnīt get taxed including my tips. Therefore I report them on form 4070 at the end of each pay period, in my case, at the time thatīs twice a month. Reported tips, done on form 4070 at the time (1996) in the United States, should equal eight percent of the waiterīs sales or better, not less. This way one avoids the problem of allocated taxable income which is done by the employer to hold employees responsible for their taxes at the end of the calendar year. These allocations can add up to a big chunk of money owed to the government. The result can be a more or less friendly reminder from the IRS asking to pay up or else. Back-taxes are due and payable at the time of the income tax report. That is usually when the pockets are still empty from the slow winter business and the yearly overspending around Christmas. I know how it feels to pay taxes for the previous year. Therefor if I can avoid getting into debt with the IRS I try to, wherever possible, pay my taxes as I go instead of afterwards.
helmut schonwalder 12-14-2002
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