Taxing the hand that feeds you
Since 1988 federal tax has been imposed on employers for the amount of their employees? incomes derived from tips---a substantial source of government revenue that, until now, the Internal Revenue Service has had much difficulty collecting. THe problems with determining the amount that waiters and others receive in cash tips was greatly simplified for the IRS last month, when the U.S. Supreme Court ruled six to three in United States vs. Fior D'Italia that the IRS can use credit card tip averages to estimate the cash tips at restaurants. This could have a massive impact on the restaurant industry and the American dining experience, as undeclared tips are often a vital component of the financial survival of small restaurants, the income of low paid restaurant workers, and of the influence that diners have over the quality of the service they receive.