Personal Finance

Tax Question. How do I declare tips

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  • Mar 27th, 2009 12:49 am
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Tax Question. How do I declare tips

How do I declare tips received from job working in a restaurant? I never kept track of them so do I just estimate them?

Or do I even need to declare them at all?
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jande9 wrote:
Mar 25th, 2009 3:48 pm
How do I declare tips received from job working in a restaurant? I never kept track of them so do I just estimate them?

Or do I even need to declare them at all?
ABSOLUTELY they need to be declared. All income needs to be declared.

You should track your tips going forward for many reasons, one being income tax.

From the CRA (http://www.cra-arc.gc.ca/nwsrm/rlss/200 ... eng.html):
Remember, tips are taxable income

Ottawa, Ontario, January 21, 2008…The Canada Revenue Agency (CRA) wants to remind Canadians who earn tips and gratuities of the rules for reporting this income on their annual income tax returns. Restaurant servers, hairdressers, valets, taxi drivers and others who earn tips may not have all of their income recorded by the employer and therefore not included on their T4 slips.

The Income Tax Act is clear regarding the treatment of income from tips and gratuities: all tips are taxable and it is your responsibility to report any you receive. The CRA is committed to administering and enforcing the Income Tax Act in a fair and equitable manner, ensuring that the requirements under the law are met while respecting the rights of the individuals involved.

When people earn tips and do not report them, they are increasing the tax burden on their friends, family, and neighbours who have all of their income reported by their employers on their T4 slips. In preparing to file your tax return, you may have to contact your employer to find out if any or all of your tips will be included on your T4 slip. Even if you do not get a T4 slip to show your income from tips, you are still required to report all tips received in the course of your work and report the amount on line 104 of your return. It is your responsibility to keep track of all amounts received in the course of your employment. During a review or audit, CRA officers use the available records to confirm taxable income. If such records are not available, officers use other supporting information or documents available at the time of the review.
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Mar 6, 2007
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jande9 wrote:
Mar 25th, 2009 3:48 pm
How do I declare tips received from job working in a restaurant? I never kept track of them so do I just estimate them?

Or do I even need to declare them at all?
I just thought of something, did any of the customer specifically said "here's a gift for you"?
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jmc0 wrote:
Mar 25th, 2009 4:17 pm
I just thought of something, did any of the customer specifically said "here's a gift for you"?
in writing :lol:

Never under estimate the service industries lust for tax fraud/evasion and the tax cheats tensity in defending said tax evasion. And haven help you if you dare mention that perhaps 15% is a little much to tip :lol:
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Dec 4, 2007
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jmc0 wrote:
Mar 25th, 2009 4:17 pm
I just thought of something, did any of the customer specifically said "here's a gift for you"?
lol, I found this to be pretty funny actually...
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Honest to goodness, I doubt if anyone who actually received tips, declare it as their income.
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cgtlky wrote:
Mar 25th, 2009 6:24 pm
Honest to goodness, I doubt if anyone who actually received tips, declare it as their income.
Really? Do you know anyone in the service industry (restaurants, bars, etc.) that don't?

It's pretty hard to explain to an agent how you can be a server (waiter) and NOT receive tips.
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I've heard the CRA sometimes runs "Tip Projects" in major tourism cities - Niagara Falls is a fovorite target.

They go into a restaurant, add up the sales, extrapolate the tips and apply a standard percentage to all the servers and re-assess their tax returns. It is then up to the server to prove they didn't make the amount of the reassessment (anecdotal evidence from a former CRA auditor and tax prof).

It is best to declare them and pay up. Line 104 is the place for it

Lots of info at the CRA website - search "gratuities."
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cgtlky wrote:
Mar 25th, 2009 6:24 pm
Honest to goodness, I doubt if anyone who actually received tips, declare it as their income.
most do, but it's usually far less than what they actually receive.

if you work as a server and don't delcare any gratuties you are just practically begging to be audited...
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i think most people in service will add in some form of tips (i.e . a % of income or something). Obviously the proper way to do it would be to actually track and report the actual amount.

a tidbit of useless info: I was talking to a senior CRA auditor a few weeks ago and he was saying that they know there is TONS of unclaimed monies in the service industry, and they could easily go in and audit the sh!+ out of restaurants. Almost everything is card payment, separate tip line item with the servers name on the bill, so easily track-able. But they cant go all gung ho cause there would be industry uproar/bad press.
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kaycee8877 wrote:
Mar 26th, 2009 3:13 am
i think most people in service will add in some form of tips (i.e . a % of income or something). Obviously the proper way to do it would be to actually track and report the actual amount.

a tidbit of useless info: I was talking to a senior CRA auditor a few weeks ago and he was saying that they know there is TONS of unclaimed monies in the service industry, and they could easily go in and audit the sh!+ out of restaurants. Almost everything is card payment, separate tip line item with the servers name on the bill, so easily track-able. But they cant go all gung ho cause there would be industry uproar/bad press.
exactly...

then again, they can't enforce it properly because it's common to have the tips split among the servers/bartenders/etc, and as such CRA would be claiming one amount whereas your actual take-home tips would be much lower... and it's too much of a headache for them as it is.

just declare a little bit when it comes to tips and get it over with - give gov't something back... if you're declaring it all down to the penny, you're either too honest or too dumb (as a lot of that tax money will just end up being spent on something you'll hate tomorrow anyway, and you won't have any say in it since you paid your taxes in full ;) ).
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Mar 6, 2007
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kaycee8877 wrote:
Mar 26th, 2009 3:13 am
i think most people in service will add in some form of tips (i.e . a % of income or something). Obviously the proper way to do it would be to actually track and report the actual amount.

a tidbit of useless info: I was talking to a senior CRA auditor a few weeks ago and he was saying that they know there is TONS of unclaimed monies in the service industry, and they could easily go in and audit the sh!+ out of restaurants. Almost everything is card payment, separate tip line item with the servers name on the bill, so easily track-able. But they cant go all gung ho cause there would be industry uproar/bad press.
For places where I go to eat, tips are optional; so maybe - IF I get good service, I might cross out the word 'tip' and write in 'gift (along with my initial)' on the CC slip.

In legal and laymen tems, what's the difference between tips and gifts anyways (like how/what's consider what)?
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Jul 27, 2008
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jmc0 wrote:
Mar 26th, 2009 8:05 pm
For places where I go to eat, tips are optional; so maybe - IF I get good service, I might cross out the word 'tip' and write in 'gift (along with my initial)' on the CC slip.

In legal and laymen tems, what's the difference between tips and gifts anyways (like how/what's consider what)?

Taxes are only payable on income: s.2(2) Income Tax Act. A tip is considered to be "income" in the course of employment. A gift is not income. Rather, it's more of a windfall -- which is why lottery winnings are not taxable in Canada.
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jmc0 wrote:
Mar 25th, 2009 4:17 pm
I just thought of something, did any of the customer specifically said "here's a gift for you"?
wow, thats some bad English!
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