Tip reporting and payroll

[Zamig816]

I really need advice! I am a waiter. At the end of every shift I hand in a sales report to my employer that shows all of my credit card and and cash tips received. I also clock in and out every shift. However, I just received my w2 and there are some major issues concerning reported tips by my employer and my hourly wage ($2.23) that should be filtered through payroll. My recorded wages in box 1 on my w2 totaled $435.90 (extremely low) with next to no taxes taken out. I asked my employer what was going on and she informed me that she only reported $435.90 and that her accountant says i need to claim an additional $22,000 dollars in the unreported tips section of my tax return which took me from getting a return of 4k to now owing $1,300. I also learned that the wait staff was not being processed through payroll after a co worker requested a pay stub to verify her income for something. Normally server payroll checks are 0 dollars because our hourly wage all goes towards taxes, so I was never concerned about not receiving my usual 0 dollar payroll check like I had from previous employers. Turns out she was just writing us personal checks every week that came straight out of her business' bank account that only included what I made in tips, and not my $2.23 an hour. So not only do I now have to claim $22,000 of reported income as unreported, but also have not received my $2.23/hour the entire time I've worked there which basically means I'm going to end up paying my hourly wage out of my own pocket to the IRS since the business failed to process us through payroll and put that money towards my taxes. Is this some sort of legal loophole in which I just have to bite the bullet and pay up? If not, how do I fight this to make sure I'm neither audited or paying the IRS money that I shouldn't have to? Please help! Any information would be greatly appreciated.

[IsabellaG]

This is a very serious problem and one that is beyond anything we can do for you here. If your employer has been falsifying your payroll records, it's a legal matter and you should obtain legal advice in your local area. Do you mean that you never received paystubs from this company that reflected your hourly wage and your reported tips? And your W-2 shows no federal withholding? If there was withholding that should have been remitted to the IRS from your hourly wages, and your employer didn't do that, you need to understand that it's your money that the company kept for themselves. Just because your paycheck would be zero doesn't mean that that money isn't yours, and shouldn't be credited to your federal and state withholding and Social Security.  Again, this is a legal matter. The IRS will base your tax liability on the W-2 that they receive unless they have information to the contrary. You can consider reporting this situation to the IRS. Any records that you have to show your hours worked and the pay you received would help you. 

[Zamig816]

Yes so I had zero federal income tax withheld. There were no pay roll checks or pay stubs that showed the hourly wage, tips, or hours for the front of house employees. Unfortunately all the records of how many hours I worked and tips I made was on a sales report that was turned into the restaurant at the end of every shift. My w2 states that I only made 435.90 in box 1 and my employer sent a text saying that I had 21,285 of unreported income (which isn't true since I hand in a sales report every night with all of my cash and credit card tips recorded on it) and said that her accountant HIGHLY recommended that I enter that total in the unreported tips column, and I'm worried about being audited of I don't report it. It's a tough situation because i really can't afford a lawyer or to be fired for bringing this to my employers attention. I am actively seeking a new job, but unfortunately I am kind of stuck at the moment.

[IsabellaG]

If you are still working for this company, at least retain the records of your current earnings and tips. There isn't anything we can do to fix this situation, but I do hope you are able to move to a better position soon.

[Christineb]

I am having the same issue with my employer except I do have paystubs and reports to back them up . The owner initially gave the servers who get credit card tips paid out nightly a w2 that only showed the 2.13 hour wage and taxes paid on that wage only. Also received 0 dollar checks or we would owe them sometimes. None of the tips we reported or taxes they withheld from those tips were included on the initial w2 but after I confronted her she sent us a different w2 including the corrected amount for wages but I’m pretty sure the taxes weren’t right. I filed my return and now I received a letter 4464c and have no clue when or if I will receive my refund. Also one of my co workers waitress as well received exact same letter! 

[KrisD15]

It sounds like your employer might be in hot water, but unfortunately you are the one being inconvenienced. 

The IRS suggests you wait for them to investigate, and you may also contact Taxpayer Advocate Service (TAS) for help. TAS service is free and they are part of the IRS, so they should be able to get answers fairly quickly.  

You can reach TAS at 877-777-4778

IRS link to letter 4464C