Margaret CPA in OH Posted January 28, 2008 Report Share Posted January 28, 2008 Hello, New restaurant client, struggling (aren't they all) had a few family members and friends volunteer to serve customers. They received no wages but some tips and reported to owners. One received over $900! How is this reported for 941 purposes (if at all)? Since they weren't employees, they wouldn't receive W-2's, would they? They weren't 1099ers, I should think, either. Thanks for any insight. I will be calling the state for unemployment and worker's comp reporting. I don't see this issue addressed in their documentation, either. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 28, 2008 Report Share Posted January 28, 2008 They should receive W-2s for the tip income. Quote Link to comment Share on other sites More sharing options...
lbbwest Posted January 28, 2008 Report Share Posted January 28, 2008 Hello, New restaurant client, struggling (aren't they all) had a few family members and friends volunteer to serve customers. They received no wages but some tips and reported to owners. One received over $900! How is this reported for 941 purposes (if at all)? Since they weren't employees, they wouldn't receive W-2's, would they? They weren't 1099ers, I should think, either. Thanks for any insight. I will be calling the state for unemployment and worker's comp reporting. I don't see this issue addressed in their documentation, either. This is SO wrong, that I'm going to take a deep breathe and try to calm down. Although state laws differ Federal Labor law and payroll taxes don't. The "relatives" by labor law should be paid the minimum for servers. IF they maintain they are "volunteering" their time, they can't keep the tips. My clients' workman's comp insurance providers are under the impression that restaurants are high liability enterprises, if your clients' relatives aren't on the payroll, they aren't covered by workman's comp. If you don't think relatives will sue each other, come to Michigan and you can meet mine. The restaurant industry is highly controlled by various governmental entities (e.g. health departments.) Most restaurants fail because of the business side; and very quickly. PLEASE have someone mentor you in the various regulations. lbb Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted January 28, 2008 Author Report Share Posted January 28, 2008 Thanks so much for the insight and guidance. Would you be my mentor when you have calmed down? I have consulted a number of resources including PPC's Specialized Industry Tax Guide but the specific issue of volunteers receiving tips from customers of a family business was not addressed. And clearly I am not a labor law expert. I called the Department of Labor to get a definition of "employee" as recommended by the Workers' Comp person. I was given a citation of Chapter 29 Section 785, "something, something suffer or permit to work something, etc." I could not find this but I think he was saying that a volunteer is considered an employee if permitted to work. I have shared the comments with this client and have sent to consult with the SCORE mentor they have met. I believe they will no longer be using volunteers as it appears those good intentions are fraught with problems. This business is clearly not as easy and straigtforward as I, for one, would like. I cannot change what happened in the past. I was seeking advice on how to handle and report the historical financial transactions. They did not come to me in advance to ask how to handle anything. They presented details of what took place. I was asking for advice/suggestions on the best way to report income. Anyway, thanks again for your helpful suggestions. The wise words of experts are always appreciated; that's why I come here regularly. Quote Link to comment Share on other sites More sharing options...
lbbwest Posted January 28, 2008 Report Share Posted January 28, 2008 I am never wise, just wordy. I practice in Michigan and although not an expert in anything, am somewhat familiar with the Restaurant Industry, your area SCORE volunteers may NOT be familiar. I would suggest your client join the state restaurant association, the MRA (Michigan Restaurant Association)is VERY knowedgeable and up to date on regulatory requirements, tipping laws, etc. All areas of tax are fraught with "urban myths" but I truly believe the restaurant industry is one of, if not the worst. Your client NOT consulting you before making business decisions promises to be a continued nightmare. Good Luck! Quote Link to comment Share on other sites More sharing options...
jainen Posted January 28, 2008 Report Share Posted January 28, 2008 >>the restaurant industry is one of, if not the worst<< Restaurants already have so many dadburn guvmint revenooers snooping around that I would think owners would take extra care to avoid unnecessary attention. If IRS wants to question how employees can afford to not get paid, INS just might stop by with some answers. Then state Alcohol Control might wonder if that means they are serving free drinks. And the state police get interested in how old the non-paying patrons are. And if they can't pin anything down, they'll take the cheap shot of calling in the county health inspector. And he'll call the planning department. And the wheelchair lady always tags along with them because she's looking for ADA violations to sue about. That interests Workers Comp, and now here comes State Employment asking about the missing list of workers that Homeland Security mandates. Meanwhile it turns out the guy who delivers the produce is Teamsters Union, and he has a thing about people with badges.... Bottom line is, if this business is undercapitalized or otherwise not economically viable, give it up. Quote Link to comment Share on other sites More sharing options...
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