Pros And Cons Of Tipping
Service consumers often leave voluntary payments of money – “tips” – for the workers who served them. Among the services workers commonly tipped in the United
States are bartenders, bellhops, casino croupiers, concierges, delivery people, doormen, golf caddies, limousine drivers, maître d’s, massage therapists, parking valets, porters, restaurant musicians, washroom attendants, shoeshine boys, taxicab drivers, and tour guides (Star, 1988). Although not as widespread as in the United States, tipping is also practiced in most countries around the world (Star, 1988).
Consumers’ decisions about whom and how to tip are largely determined by custom. However, service industry executives and managers need not passively accept the dictates of custom. …show more content…
The tax liabilities associated with tipping can be eliminated by participating in one of two programs the Internal Revenue Service has set up for increasing tip reporting
(Mills & Mason, 2004). The Tip Rate Determination Agreement (TDRA) is an arrangement in which the IRS agrees not to audit an employer for undeclared tip income if the employer gets 75 percent of his or her tipped employees to promise in writing to declare tip income equal to some percentage of sales predetermined by the IRS. The Tip
Reporting Alternative Commitment (TRAC) is a similar arrangement in which the employer is freed from audits of tip income in exchange for educating employees every quarter about their obligation to report all tip income. Although these programs increase tip reporting, they do not completely eliminate under-reporting of tip income. In essence, the IRS is agreeing to let firms get away with having employees under-report some of their tip income in exchange for having more of it declared than would otherwise occur.
Thus, service firms participating in these programs can still benefit from the
States are bartenders, bellhops, casino croupiers, concierges, delivery people, doormen, golf caddies, limousine drivers, maître d’s, massage therapists, parking valets, porters, restaurant musicians, washroom attendants, shoeshine boys, taxicab drivers, and tour guides (Star, 1988). Although not as widespread as in the United States, tipping is also practiced in most countries around the world (Star, 1988).
Consumers’ decisions about whom and how to tip are largely determined by custom. However, service industry executives and managers need not passively accept the dictates of custom. …show more content…
The tax liabilities associated with tipping can be eliminated by participating in one of two programs the Internal Revenue Service has set up for increasing tip reporting
(Mills & Mason, 2004). The Tip Rate Determination Agreement (TDRA) is an arrangement in which the IRS agrees not to audit an employer for undeclared tip income if the employer gets 75 percent of his or her tipped employees to promise in writing to declare tip income equal to some percentage of sales predetermined by the IRS. The Tip
Reporting Alternative Commitment (TRAC) is a similar arrangement in which the employer is freed from audits of tip income in exchange for educating employees every quarter about their obligation to report all tip income. Although these programs increase tip reporting, they do not completely eliminate under-reporting of tip income. In essence, the IRS is agreeing to let firms get away with having employees under-report some of their tip income in exchange for having more of it declared than would otherwise occur.
Thus, service firms participating in these programs can still benefit from the