Posted on 06/17/2002 9:00:13 AM PDT by MeneMeneTekelUpharsin
WASHINGTON – The Internal Revenue Service can use estimates to make sure it is collecting enough taxes on cash restaurant tips, the Supreme Court said Monday. The court beefed up the IRS' power to calculate taxes that businesses owe from employees' tips, a thorny task because often the tips are cash and workers report their own earnings. The ruling is a defeat for the estimated 200,000 restaurants with tipped workers, and many other businesses whose employees receive tips. The court said the IRS can estimate the amount of cash tips given to employees based on tips shown on credit card receipts. The estimate is used to determine taxes.
Nationwide, employees reported collecting $14.3 billion in tips in 1999, although the IRS suspects that amount could be higher and has been working with restaurants to improve reporting. This case pitted one of the nation's oldest Italian restaurants against U.S. tax collectors. The restaurant contends the IRS formula does not take into account stingy cash tips, takeout meals or tip-sharing among hostesses and other staff. Justice Stephen Breyer, writing for the 6-3 court, said while the practice is not illegal, "we recognize that Fior D'Italia remains free to make its policy-related arguments to Congress." The ruling is a follow-up to the Supreme Court's 1973 decision that the IRS can make an educated guess about employees' tip taxes when records are inadequate. That case dealt with taxes owed by workers. At issue here is tax responsibilities of employers, who must pay 7.65 percent Social Security taxes on the tips their employees collect.
Fior D'Italia, which has been serving veal and pasta dishes in San Francisco for 116 years, had challenged an extra $23,000 bill that was calculated with estimates. Using credit card receipts, the IRS had figured that workers were tipped about 14 percent on meals. In a dissent, Justice David H. Souter, said the court's decision "saddles employers with a burden unintended by Congress." Also dissenting were Justices Antonin Scalia and Clarence Thomas. The San Francisco-based 9th U.S. Circuit Court of Appeals said the IRS could not prove that people who paid with cash tipped 14 percent, and that the IRS therefore should stop using the estimates. Monday's ruling says the IRS can resume the practice. Restaurant owners contend that if the IRS suspects underreporting, it should individually audit workers.
If the IRS really wanted to assess taxes, they'd start looking at companies like G.E. who haven't paid taxes for 30 years. They Should go after the companies who defraud the government by not paying taxes, because they have to import their own products. The IRS only harasses the public because it has power over a single person, and the ability to destroy a life. I watched them destroy a friend of mine with an audit. No governmental agency should be allowed to wield such power, over the people it relies upon for revenues.
Its funny how our government will spend billions on catching a few tip cheaters while it allows japanese and other asian businesses to pay no taxes whatsoever through the use of a scheme that shuffels the books. 20/20 did a story on this not long ago. Many really big companies from asia pay no taxes at all. It must be too politically incorrect to go after asian companies, so we must bust the American who fails to reports couple of hundred dollars in tips.
I don't believe this would be very accurate. Many credit card payers are business clients, whose receipts are reimbursed by their company. I would have to believe that business clients who are reimbursed are more generous in their tipping than those who pay cash.
Those who pay by credit card tend to tip more as often it's a business card. Cash payors are a bit more stingy. The IRS estimate is going to take more taxes out, an unfair result.
Good post.
Sorry for the editing error. Should read: "Does a waitress get a credit if she can prove that Hillary Clinton was a frequent customer? . . ."
That's right... ALL checks from every employer should be made to the INTERNAL REVENUE SERVICE in care of each and every worker...
The government should then determine how much money each individual should have to live on... The IRS would then cut a check to that individual for the amount of money the government thinks they should have... You know, 25% to 30% of the total check...
That's the only way we will stop those evil tax cheats from not paying their fair share that they owe to everyone else...
Remember, if the government gets ALL the money FIRST, then there can be no one cheating...
Because it is THE GOVERNMENT'S MONEY FIRST!!!
NOT the individual that earned it...
The government is much more important than any individual or free people, and the government should be funded at all costs, no matter what...
And then we will all live happily ever after...
I refuse to be jealous of my fellow tax-slaves.
AWAY IRS!
FMCDH
ahhh, you really ought to check your facts before spouting outright baloney
from note 7 in g.e.'s lastest 10-k annual s.e.c. filing for the year ended 12-31-00, a public document -
"Consolidated current tax expense includes amounts applicable to U.S. federal income taxes of $3,005 million, $1,632 million and $1,459 million in 2000, 1999 and 1998, respectively, and amounts applicable to non-U.S. jurisdictions of $1,246 million, $1,399 million and $1,335 million in 2000, 1999 and 1998, respectively."
g.e. paid about 6 BILLION to the u.s. and another 4 BILLION to foreign jurisdictions in '98, '99 and '00 (lastest data available, 2001 10-k not yet filed)
they also list their effective federal income tax rate for each of the last 3 years at about 31% (the statutory corporate maximum is 35%)
that said, while g.e. writes extremely large checks for federal income taxes, in reality g.e. pays no income taxes because every penny came from some individual, as businesses only pass along costs to actual people
mostly from their customers, with any balance from employees and shareholders who received less than they would have otherwise
the corporate income tax should be abolished, it only serves to hide the real tax burden on people, and contributes to silly bashing of "greedy corporations", mostly by goofy dummocraps, but also by some here
as for this ruling, most restaurant employees are notorious tax cheats, and exposing them to the heavy hand of the irs might gain more support for real tax reform of some kind
anything is better than the intrusive system we have now
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.