Wife works PT at a chain salon as a W2 employee, and was told not to report tips to her employer

[jdaveault]

She just started this job a few weeks ago, and was told by her boss not to report the taxes to her employer, but rather wait until tax time and report them on our return. Neither of us have ever had a tipped job so we're new to this.  Her paystub does not reflect any extra income besides the hourly wages. She receives both cash and credit card tips that she's told to "skim out of the cash drawer" when the customer includes them.

She keeps detailed records of every tip she receives.

This doesn't seem right, since everything I've read says report your taxes each month before the 10th, and the employer will take them out of your pay. We just don't want to be penalized, but I fear if we press the issue, she'll be retaliated against since I assume this is the norm for all the employees, and we really need the job.

Thanks

[Carl]

"She receives both cash and credit card tips that she's told to "skim out of the cash drawer" when the customer includes them"

The problem with that is, if the employer gets upset with her for any reason, he can charge her with embezzling, and she could be hard pressed to prove otherwise. By law, the employer is required to withhold taxes on tips received by an employee.

Please read all at https://www.irs.com/articles/reporting-tip-income-irs to see what actions she needs to take as an employee to cover herself on the legal front.

Then I would suggest she update her W-4 with the employer to increase the tax withholding on each paycheck, so you don't get hit with underpayment penalties at tax time when she does report the tips on your joint 1040 tax return.