What you need to know about TIPS and TAXES!

[@iOSAT]

It can’t be as simple as I’m imagining - if I as a sole proprietor send a regular customer a $1 invoice for a $10,000 item and have them pay the remainder as a “tip” for a discount, is the tipped amount classified as taxable? Obviously not advisable as it’s transparent tax evasion, but on the surface it seems like the created a potential loophole. Add to that it seems like the minimum wage structure for tipped employees will need to be then - i.e. states would have to move to California’s structure of state minimum BEFORE tips. This is in contrast to most states allowing for a low minimum cash wage and the remainder to meet federal or state minimum wage is covered by tips (or the employer if tips don’t)

[@notyourdadscpa]

Yes it does seem to leave it wide open to all kinds of abuse🤔

[@RecordingsofBoardings]

Does the same apply for online merchants? I have tips turned on for my shopify store and I often get tips from people at checkout. I live in Virginia.

[@iOSAT]

Yeah I have the same thought, what’s to stop online merchants that are issued 1099k’s from offering discounts if a certain percentage of the total is paid as a tip?