Employment attorney Alan Crone appeared on the News Channel 5 Digital Desk to talk the new No Tax On Tips Act as part of the new bill passed by President Trump. Alan discusses how much money tipped workers can save, while also giving important information on how to keep up with their tips. Video and transcription are below!
Transcription:
Andrew Douglas
Good morning. Welcome back to the Action News five digital desk. We’ve heard so much about no tax on tips, it was actually signed into law in the big, beautiful bill that President Trump signed earlier this month. But what does that mean for the 10s of 1000s of service workers all across Memphis and the mid south and who’s eligible? How much money could you save? And how do you keep track of it all? Well, these are all great questions, and I’m happy to be joined on the Action News five digital desk by Memphis employment attorney Alan Crone, joining us once again. So Alan, I know that you probably get a lot of questions with regards to this issue. Where do we begin on this? What do you tell some of those clients? Perhaps people who call you and ask, Hey, does no tax on tips apply to me? Good morning.
Alan Crone
Good morning, Andrew, thank you for having me on glad to be here. Yeah. Let’s get right to it. I mean, basically no tax on tips applies to anybody who gets tipped, whether it’s restaurant service workers, valets, anyone like that, who receives, who receives tips, it also, there’s also no tax on overtime. So that’s a big benefit for some of those same workers who work overtime might be be eligible for time and a half. There’s no tax on that. Of course, that’s a much larger universe of folks. So you know, the big, beautiful bill for working people was beautiful because this, this is going to save real working people money from from taxes and hopefully will you know now, you mentioned, you know, keeping up with it. Now, you got to keep up with it, in case you’re ever audited, because there is a cap on it about $25,000 of of tips, so you’re taxed on, on on things above that, but it is a good step forward for working class Americans. I think.
Andrew Douglas
Okay, good to know. And thank you for for weighing in on that I was going to ask about a cap. Is there a cap on something like this? And what do you recommend Alan as the best way to keep track of these tips and overtime as well?
Alan Crone
Well, you know, we’ve all we’re all walking around with more computing power in our phones than that. It was used to send folks to the moon back in the 60s. So there are all kinds of apps out there where you can, you know, log your tips at the end of your shift, so to keep track of it all, so that when it’s time to go to the get do your taxes, you can provide all of that to your tax preparer. Sometimes, if you’re paid by credit card, the company will give you, you know, a record of that as as well. And the last thing is, it’s, it’s old school, but there’s nothing. There’s nothing that replaces a good spiral bound notebook. You can get them on all kinds of sizes, and just keep track of it that way. I would imagine, you know, most of my clients who are restaurant workers, for example, they keep track of it pretty much as as you go and make sure you’re keeping track of the tips that you keep some you know, in some situations, you may, you may, if you’re a waiter or waitress, you may split your tips with the bus folks, or, you know, someone else in the facility and and so make Sure you’re only keeping, well, you’re keeping track of all of that so that you you don’t you’re not getting taxed on money that you didn’t actually receive because you paid it out to someone else.
Andrew Douglas
So let me ask you, you mentioned it just briefly. Is there a cap? Is 25,000 the cap on this?
Alan Crone
Yeah, yes, 25,000 is the cap. So anything above that, you’d be taxed on regularly.
Andrew Douglas
Okay, got it. And so essentially, you’re saving an individual who’s in the service industry gets tips whatnot. I mean, how much are they going to be able to save? Ballpark?
Alan Crone
Well, it depends on the tax bracket, but you know, anywhere from a third to 25% of of that 25,000 if you you know, if you hit the the top, Andrew, your producer told me there would be no math. So. Yeah, I don’t want to do that math in my head, you know, on, on the fly, but, but, you know, someone can do that. And you know, that’s 1000s of dollars. I mean, for most of my clients, three, four or $5,000 in savings is a huge amount. And so I think it’s a great thing,
Andrew Douglas
Yes. And you mentioned, and I just want to reiterate, this is, anyone who gets tipped, or anyone who receives some sort of tip over time, that sort of thing is eligible. Doesn’t have to be a certain, you know, waitress, server, host, that sort of thing, right?
Alan Crone
Well, that’s right, the mainly, I think we’re looking at restaurant workers who are the most tipped and they you know that. I don’t want to get off on a tangent. But there’s also what we call the tip credit, which is a special Wage and Hour law for for folks that are customarily tipped. And you know, if a large part of your revenue or compensation is tip based, then this applies to you. And then if you’re eligible for overtime, the overtime element of this applies to you as well.
Andrew Douglas
Anything else you want to mention before we let you go? Alan, this is all been very helpful for the 1000s of people who watch us each and every morning.
Alan Crone
You know I would, I would say this, that the tip credit, particularly for restaurant workers, is is often abused. And so if you feel like you’re if someone feels like they’re sharing tips with people they shouldn’t be sharing tips with, or you’re not getting credit for all your tips, then you ought to go see the Department of Labor or an employment lawyer about that, because if people who are subject to it, and I’ll tell you other listeners and watchers too. Most waiters and waitresses are paid $2.13 an hour, plus tips and and so tip your waiters and waitresses over. Tip your waiters and waitresses if they do a good job, because that’s where they’re getting most of their compensation, and most people don’t really know that.
Andrew Douglas
Great advice there from Memphis employment attorney Alan Crone on the actual news five digital desk. Alan, again, thanks for your time here. We appreciate all the knowledge. Thank you.
Alan Crone
It’s my pleasure. Always glad to be on the program.
Andrew Douglas
Appreciate it. Alan.