TIP reporting is a GREAT IDEA!

TIP reporting is a GREAT IDEA!

That's right. Tracking and reporting tips is a great idea compared to the alternative. Most salons and spas are not tracking tips and to "disrupt" the potential IRS audit trail are doing crazy things like not allowing tips on credit cards.

First this will not hinder the audit. The IRS will look at the credit card receipts and expect the staff and salon to withhold a percentage (about 8%) of service sales as tips - no argument allowed!

Second to not allow tips on credit cards reduces tips substantially. Everyone knows tips are higher on a credit card than on cash payments - many times TWICE as much.Let's do the math:As a stylist you only take cash. You have a $1000 service sales week and end up with an average of 8% tips. That means you make $80 in tips.Another stylist accepts credit cards and 80% of the payments are made with the card. The tips average 20% of service sales. That means the tips would be up to $200 on the same $1000 in service sales. If the IRS gets 30% of the money the stylist taking credit card tips still clears $140 instead of only $80 (that still needs the taxes taken out).

C: Maybe you think cash customers tip more than 8% - track it for a week and tell me I'm wrong. In fact in some salons that have gone to no tips on credit cards customers literally don't have the cash to give a tip - how much cash is in your wallet rignt now?

Do the math and think about it. Be IRS compliant and make more money or .........What do you think? Fred


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