USA: Tipping and Taxes

[harvyk]

Re: tipping in the USA a little stressed about it

When I exchange $$$ into US I always specify I want a bundle of US$1 notes...

I usually either round up to the nearest $1 and give that as a tip (taxi's if it's a short ride) add a $1 (bars), or add 10% (resturants).

If someone truely goes out of their way for me I'll increase it, but I'll also give it to them personally and make sure they know I've gone over my normal tip.

That said, don't get too worried about tipping... You'll very quicky pick up on what is expected.


I have to agree with others though, it's not the tipping which I find is annoying (expected but not mandatory), it's the other taxes which get included at the register, but was not included in the marked price. (I recently hired a car, and the extra taxes not included in the marked price came to nearly $80)

About 18 months ago I was talking to a friend of mine who lives in San Francisco. She couldn't believe it when I told her "back home, if something is advertised for $10, that's all you'll pay"

 

[yeldarb8]

Re: tipping in the USA a little stressed about it

If they are not getting paid a wage, even a miserly $2.13 per hour then there is something illegal going on. As you indicate, staff in such a situation would not be paying ANY tax for their work. So the employer pays less (wages and tax), the staff pay no tax on their earnings (tips).

I would not attend an establishment if I knew this to be the case; l all I can do is assume they are on the minimum wage and pay tax on that+tips; then tip accordingly.

In any respect, this make no difference to the fact that tipping is ingrained into US society and patrons are expected to tip.

Yes, there is a lot of illegal activity going on. The "tax gap" in the US is HUGE.

Rather than paraphrase the IRS requirements with respect to tip income you can find them here:

Reporting Tip Income - Restaurant Tax Tips

The "minimum" assumed tip income is 8% of gross receipts at establishments required to report (note there are exemptions, particularly at small establishments with less than 10 employees working on a typical business day). Employees are generally required to self-report tip income to their employers.

Businesses everywhere try to avoid paying the employment taxes; these taxes include Social Security, Medicare, FUTA, and SUI. Since employees pay half the SS & Med they likewise want to avoid it.

Here is how the employer's burden of unemployment taxes break down on the first $9000 you pay someone:

Social Security = 6.2% = $558.00 (the employee also pays this)
Medicare = 1.45% = $130.50 (the employee also pays this)
SUI = 2.7% (typical; can vary 0.8%-8.25%) = $243 (only employer pays this)
FUTA = 0.8% = $56 (only employer pays this)

So the total employment tax burden on that first $9000 is 2x$558+2x$130.50+$243+$56 = $1676. This does not include the employee's Local, State, and Federal income tax withholdings.

The tax base for 2011 for SS is up to $106,800 of income. No limit on Med so you pay it up to any level of income. For SUI the state thresholds are typically the first $9000 of employees wages. For FUTA the limit is the first $7000 of each employees wages.

 

[Sprucegoose]

Re: tipping in the USA a little stressed about it

Not going to happen in the US. What a lot of people don't realise is that a lot of people in these service industries in the US get virtually no income at all, except for their tips. It can be a little painful working out the 15%, but I just factor it into the cost of travelling to the US, treat it like another tax and it's not hard to take.

Yes it's very third world isn't it!!

 

[Sprucegoose]

Re: tipping in the USA a little stressed about it

It does become second nature after a while.

I do find the concept of tipping in five star hotels to be annoying as you are supposedly paying a price premium for service which in effect has been outsourced to a myriad of independent contractors (valet, bellboy, concierge, housekeeping etc).

Agree that it is important to double check the bill at a restaurant, as often in tourist areas, you can get the "foreigner" bill with an amount already added in.

Yes I had a tip added to my bill in NY, so I paid it. The top sheet Also had space for a tip, which I didn't Include. I got the rudest looks!!

I gave them Tip on the way out - dont deal with Aussies!!

 

[DC3]

Re: tipping in the USA a little stressed about it

They earn stuff all, because management are greedy and the minimum wage is generally lousy as others have mentioned. I'm a strong subscriber to "when in Rome" even though others are not.

How true. There are some real scrooges about. After all the costs involved in travelling and staying in the USA, some want to 'nickle and dime' the under-paid wait staff, etc. Tips are factored-in by the IRS, to some extent anyway.

At least in the USA you can actually get some decent service. The service in the average cafe/restaurant in Australia is nothing in comparison.

Some travellers need to loosen-up a bit and may even feel good about it, if they try.

 

[NYCguy]

Re: tipping in the USA a little stressed about it

I cheerfully tip housekeeping staff in hotels, because they get paid nothing to do what any reasonable person would concede is a pretty s*it job. My standard rate is US$20 per night.

Bellhops, doormen, room-service staff: this is what $1 and $5 notes are for.

For Concierges it is a little more complicated. If I ask them to do something difficult and they come-through; eg same-day reservations at an otherwise impossible restaurant; they are rewarded appropriately.

For run-of-the-mill requests, $10 or $20 per service is my standard tip.

I tip my hairdresser 25%, because she's a brilliant cutter & colourist, and she's very entertaining to boot.

When I have to take a cab I usually make the tip about 10% of the fare.

Restaurants/cafés/bars - 15-20%. Exceptional/entertaining service - 25-30%.

I think it pays to keep in mind that most of the people to whom you pay tips are unlikely to ever be in the financial position to travel to the other side of the world. Let the moths out of your wallet, and take heart in knowing that the maid, waitress or cabbie whom you tip will probably put that money to good use paying their rent or feeding their children.

 

[soapsud]

Re: tipping in the USA a little stressed about it

Thanks for all of your help I have read lots of links recommended by members, and printed of some advice, so armed with this I should breeze through New York and Las Vegas, but still, it will add another 20% to our total trip to the USA, saving grace is the Aussie dollar Ya!!!!!!

I still Do not subscribe to this kind of wage system that exists in the Hospitality industry in the states, I like to give tips to service industry staff, and realize that this does help support and contribute to there poor wages But NYCGuy the only way to help the poor is to not be one of them

 

[anat0l]

Re: tipping in the USA a little stressed about it

USA is not the only nation that has tipping, let alone is it the only nation where it is a social norm.

Needless to say, tipping itself is a sensitive topic. Huge debates sometimes transforming into vitriolic wars of words.

In the end, to ultimately answer your question, I'd be mindful of it but I wouldn't be stressed about it.

 

[DC3]

Re: tipping in the USA a little stressed about it

... I should breeze through New York and Las Vegas, but still, it will add another 20% to our total trip to the USA ...

Unless you're tipping absolutely huge amounts it should not add too much % to the overall cost of the holiday.

There's no tips involved for:

• airfares
• accommodation (except maybe a couple of dollars for the porter on arrival, if you don't want to carry your own bags, daily housekeeping and room service if you choose to dine-in)
• car hire (unless for valet tips)(all hotels in Vegas have free self-parking, from my experience)
• take-away meals
• snacks/drinks at 7 Eleven, etc
• entertainment
• shopping
• public transport

The major cost for me is airfares + hotel accommodation. Tip the porter once when bags are brough to room on arrival, or carry them myself. Tip housekeeping a few dollars. No room service for me, usually.

My tips don't add too much to the overall percentage. However, we all have our own way of dealing with it.

 

[NYCguy]

Re: tipping in the USA a little stressed about it

... The only way to help the poor is to not be one of them...

I'm not quite sure what you mean!

 

[yeldarb8]

Re: tipping in the USA a little stressed about it

Tips. The best justification I have ever seen for paying attention in school, doing homework, and applying oneself to academic and extracurricular activities. Seeing this sad state of affairs first hand was a very sobering experience for my 13 year-old nephew. He went from a C/B student to a B/A student within a year.

 

[Foreigner]

Re: tipping in the USA a little stressed about it

In Las Vegas end of 2010, having stayed 6 nights, the housekeeper was the same person. She was from the Philippines and chatty. I gave her $5 on the 3rd day and again on the day of checkout. Between those days, she changed the bed linen on day 3 and left me pools of toileteries. I am sure they like to be appreciated for keeping clean the guest rooms.

 

[ozbeachbabe]

Re: tipping in the USA a little stressed about it

I was told by a QF F/O who worked as a waiter in SFO when he was doing his flying training that you only need to tip a percentage on the food, not the alchohol or total cost of the bill.

He explained that when each waiter did their reporting from the till each night for the IRS it was only ever the food component they were concerned with.

On a recent trip to the US we tipped about 20 percent of the meal (hardly ever ordered alcohol anyway) because the bill wasn't a lot to begin with. Whilst I didn't know people 'employed' as waiters frequently were paid nothing at all I realise that the IRS charges provisional tax on an amount they deem will be earned in tips so the individual can end up paying tax on tips they're not even getting.

As has been said already on this thread in this case I do adopt the adage "when in Rome....." :idea:

 

[anat0l]

Re: tipping in the USA a little stressed about it

In Las Vegas end of 2010, having stayed 6 nights, the housekeeper was the same person. She was from the Philippines and chatty. I gave her $5 on the 3rd day and again on the day of checkout. Between those days, she changed the bed linen on day 3 and left me pools of toileteries. I am sure they like to be appreciated for keeping clean the guest rooms.

One of the presumptions from the anti-tipping crowd is:

• If you wanted a pool of toileteries, you can request this at any time, without tipping (i.e. putting aside the ignoring of social norms)
• A similar thing for changing the linen, except this should be done everyday without fail unless otherwise set out in the rules of the house (e.g. long term accommodation, Candlewood Suites, etc.) or if you opted not to have them changed (e.g. using the "Save the Environment" card).
• Anything less from housekeeping - whether with a tip or without a tip - would be less than the expected service which you could justifiably complain to the management about (e.g. if your bathroom was not adequately cleaned, then you could complain and the manager would be hard pressed - read, would be impossible for them to - insist that if you had tipped housekeeping then your room would've been clean).

 

[Maca44]

Re: tipping in the USA a little stressed about it

If in doubt how much to tip in a restaurant, just double the tax shown on the bill. Then add a little more if you consider it warranted.

 

[serfty]

If in doubt how much to tip in a restaurant, just double the tax shown on the bill. Then add a little more if you consider it warranted.

Not a bad idea, however, check for any "service" charge(s) that may have already been applied.

 

[Sprucegoose]

Re: tipping in the USA a little stressed about it

Not a bad idea, however, check for any "service" charge(s) that may have already been applied.

The service charge trick is usually tried on in very touristy areas I found.

I don't tip in that case and always get rude looks and then they cop a mouthful.

 

[pshepvic]

Re: tipping in the USA a little stressed about it

Be aware that in many of the service industries "employees" get no actual salary, just tips. The IRS continues to turn a blind eye to this (no employment taxes collected) thus putting those businesses at actually create stuff and have real employees at a big disadvantage (tax burden wise). Thus, real jobs get exported.

Apologies I haven't read the whole thread, but this has actually changed in recent years. The IRS now makes assumptions about how much people in service industries receive in tips, and tax them based on this. A waiter might make $6 an hour, which would equate $12k a year income, but then they could easily double or triple this with tips (or even more). The IRS will make an assumption that they are receiving some tips based on their job and employer, and will tax them based on that, irrespective of whether they actually received those tips or not.

Agree with it or not, these people live off their tips, and generally you get better service in most places in the US than in Australia. Sometimes it can be over the top, but I guess that's still better than some of the half-a***ed service you get here!

In reality, they should get rid of the whole tipping culture, increase the minimum wage to $16 an hour like it is here, and the problem would go away. There would be a short term inflation impact as prices rise, but if you take into account the tipping, that's the "real" price anyway, so the amount of money flowing through the economy isn't really changing.

But have you ever tried to tell an American that their culture is flawed? Good luck...

 

[NYCguy]

Re: tipping in the USA a little stressed about it

But have you ever tried to tell an American that their culture is flawed? Good luck...

 

[pshepvic]

Re: tipping in the USA a little stressed about it

The funny thing is, I have lots of American friends and they agree with me! They all live in the northwest though ... maybe a slightly different culture to down south!