Tips to volunteer restaurant servers

[Margaret]

A new client has a very small restaurant with a few employees but many family members volunteer their time. On occasion they do receive tips. How is that reported? What other issues might there be for volunteer workers? There must be a multitude of such businesses where family members are not compensated as employees but this is my first client with such. Thanks for any insight!

[ChEAr$]

problem!!

A new client has a very small restaurant with a few employees but many family members volunteer their time. On occasion they do receive tips. How is that reported? What other issues might there be for volunteer workers? There must be a multitude of such businesses where family members are not compensated as employees but this is my first client with such. Thanks for any insight!

Family members are not necessary children of the owner; could be siblings, aunts,
uncles I suppose.

therefore your client should check with local unemployment tax people as to
ramifications. Also his insurance for workmens' comp insurance requirements.

As for withholding tax purposes, these employees should turn in their tips and employer
should withhold accordingly AND issue W2 forms. Minimum wage issues are
another matter.

What IF one of these volunteers accidentally spilled hot coffee or scalding hot soup on
a customer? T R O U B L E!

[jainen]

Hey, Margaret!

>>many family members volunteer their time<<

Hey, Margaret! I've got some options on the Golden Gate Bridge. If you sign up right away, I'll give you a great price!

[TMI Moderator]

Back off on the antagonistic comments.

[jainen]

joshing

>>Back off<<

Sure. I'm sorry, Margaret. If Paul is upset, maybe you are too. I never intended to offend anyone. I figured your post had to be a spoof, and I responded in kind.

You described a high-cash-flow business with family members rotating through to pocket the cash, and so little bookkeeping that you can't even tell who is an actual employee. I'm not saying it doesn't exist. Of course it does--I know a place or two like that myself. The irony is in turning that situation into a serious tax question, with a straight face! Nicely done, too. Very smooth!

For Paul (who doesn't like my reaction but doesn't offer a better idea either), the serious answer is that minimum wage doesn't apply to a "very small restaurant." The so-called volunteers are clearly employees, and if they don't report all tips to their payroll clerk they should file Form 4137.

This is an obviously fraudulent setup, and if the tax preparer agrees to do it at all she should insist on establishing proper records, including W-2's. She should be aware of the severe conflict of interest if she is considering working for employees as well as the company.

But really, Margaret. You were joshing, right?

[Oxtrainer]

Tips

I thought the question was well worded and very clear. No one likes to appear foolish
and this has been a great example of how to have a board limited to the very few
and not getting questions that need to be answered by less experienced preparers.

[DaveO]

Thanks for the Question

A new client has a very small restaurant with a few employees but many family members volunteer their time. On occasion they do receive tips. How is that reported? What other issues might there be for volunteer workers? There must be a multitude of such businesses where family members are not compensated as employees but this is my first client with such. Thanks for any insight!

I have interviewed with just such a business for monthly books and tax service. I'm inclined to pass on the work due to the very loose business practices. Sales are estimated, extended family works without pay, mostly cash business etc. Also they speak limited english and I speak only enough spanish to order a beer or start a fight, not very useful skills in the accounting business.

[jainen]

you'd never hear from me

>>Thanks for the Question<<

Get in line, Dave, with the others who have a thing about the way it was asked but can't give Margaret anything more than moral support. If you don't have any solutions of your own, would you at least comment on the procedure I explained?

(By the way, I don't know what kind of a shop you run, but I find ordering beer and starting fights to be among the MOST unseful skills in the accounting business. Sadly Brad doesn't serve up the brew here, but if I couldn't start a fight you'd never hear from me at all.)

[taxmandan]

I read the post as legit, having seen such business operations in our town. If you take them as clients, understand that at some point in the near future you will be a witness for the state in actions against the owners, or worse, a co-conspirator indicted for numerous violations of tax and employment laws. I wouldn't risk my business future with such clients!

[DaveO]

Ok, I was trying to be nice.

Get in line, Dave, with the others who have a thing about the way it was asked but can't give Margaret anything more than moral support. If you don't have any solutions of your own, would you at least comment on the procedure I explained?

(By the way, I don't know what kind of a shop you run, but I find ordering beer and starting fights to be among the MOST unseful skills in the accounting business. Sadly Brad doesn't serve up the brew here, but if I couldn't start a fight you'd never hear from me at all.)[/QUOTE]

The situation is clearly messed up and will give Margeret nothing but grief if she proceeds to work with the restaurant. I would reccomend she either insist they step up and run payroll or she just back away.

Now I love a good brew and am a pretty good home brewer myself. My pugilistic activities however are mostly limited to playful banter over the internet or a beer. At times, usually after a few of the aforementioned home brews that the gloves come out. (all in good fun of course)

But on the serious side. What do you do when asked to help out a business that is totally out of complience when you can't even communicate with them? I was asked to teach quickbooks to the bookkeeper who spoke enough english to say hello and had never even turned on a computer. I'd like to help but where to start? And how much time can you afford to expend on Windows startup before you even open QB. Don't you practice in CA? Isn't it even worse there?

[Margaret]

Well, thanks, I think, for all the well intentioned and thoughtful comments (tongue firmly in cheek). As it happens, these folks are about the most God fearing clients I have. Another client who respects my conscientiousness convinced them that they needed more help than they were (not) getting from another CPA and referred them to me.

They hired a manager when they first opened in August (they haven't had time to be as devious as some here suspect) and fired her shortly after when they realized that she wasn't well organized. They went back and pulled together all the hours, pay, even tips for me to report on W-2's, etc. They do, in fact, owe some payroll taxes but are refinancing their home to pay them. They are really trying to do things the right way and I want to help them.

They speak English as well as I do as they both have college degrees. Their families have probably been in this country as long as mine. The husband is a police officer full time and the wife operates a day care. Extended family members help out on a volunteer basis because they believe in this couple and the future success of this restaurant.

Legitimate concerns about Workers' Comp and liability have been raised but I do not believe that there is intent on avoiding payroll tax. A few folks worked in the early weeks and were paid cash but we issued 1099's to them as the clients didn't realize that they should be treated as employees. Not all recipients were happy about that.

I am learning a lot about this business and appreciate helpful comments and suggestions. I do not intend to take on more but wish to do right by these clients. I believe they want to do the right thing and a positive step on that path was to come to me. I have prominently posted in my office a headline from April 16, 2003: "Tax preparer gets 3-year term Judge orders $1 million repayment for false returns." I tell all new clients that will NOT be me. I have lost at least 3 clients because I insist on doing the right thing. My own nephew was refused as a client because he didn't want to declare umpiring income that he told me about. I explained that I could not then sign his return.

If at any time I feel a client is hiding something or being unethical or not being forthright with me, I refuse to provide services. They know coming in what my stance is.

[Luis Mopeo]

I would reccomend she either insist they step up and run payroll or she just back away.

Agree. There's nothing wrong with consulting with the client and helping them comply. Of course, if the client won't follow your advice, you walk away, just like you do with any U.S.-born person who speaks perfect English.

I haven't seen any reason to starting shouting fraud. At least no legitimate reason. The U.S. tax code is tough enough for us to understand enough to wade through it. These are people from a different country and a different culture. Not understanding our tax and employment laws doesn't make them dishonest.

If you tell them to do a legitimate payroll and teach them how and they don't follow your advice, you walk away. But in my humble opinion, just because they have an accent and don't know U.S. employment law works, doesn't mean they're automatically "trouble." I think it's unfortunate that so many people jump to that conclusion so quickly.

[ChEAr$]

I don't think so

This is an obviously fraudulent setup, and if the tax preparer agrees to do it at all she should insist on establishing proper records, including W-2's. She should be aware of the severe conflict of interest if she is considering working for employees as well as the company.

But really, Margaret. You were joshing, right?

That she was joking. After all, I wasn't joking when I pointed out the real problems with
this setup, because truth is stranger than fiction. Situations like this do exists in the
real world, esp among world cultures different from our own. (I'm thinking southeast
Asia as a matter of fact.)

[jainen]

a classic con

>>Situations like this do exist<<

I know they do, and I said so. But it's still a con job.

Apparently Margaret is sincere. Sincerely conned, anyway. These are "the most God fearing clients." He's a peace officer. She takes care of other people's babies, for cryin' out loud. How could anyone doubt their good intentions?

Well, I'll tell you how. Look at their actions in this business, not at their public persona. These are college graduates pretending they don't know that a business is supposed to pay its employees and keep track of income and expenses. Their current accountant isn't buying that line, so they are shopping for a Margaret. They want HER to cover for them -- a classic con.

[jainen]

different country and culture

>>These are people from a different country and a different culture..... I think it's unfortunate that so many people jump to that conclusion so quickly.<<

Speaking of jumping to conclusions, where did you get that idea about the different country and culture?