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Someone on p.w thinks that tips are still taxed. This is technically correct -- but not really.

If the employer keeps track of tips for each employee, then they might have to report it to the IRS. Even if they do, tipped employees need to make a large amount of tips before they are even taxed. If you fill out your W-4 correctly, which for most hourly employees is "0" then the employer doesn't have to withhold for taxes. (Just SS and MC.)

HOWEVER, if no employee reports that they received tips, and the employer doesn't keep track of tips, then there is nothing to tax or report. I believe this is true for the VAST majority of people who are receiving tips. They never tell their employer, if they did they don't keep track, and if they did they won't report.

This is ESPECIALLY true for cash tips, since there is no record anywhere that the cash was received as tips.

So pay your bills in cash if you can, and leave a generous tip. The employees get paid more than if the employer would've given them a decent wage, and Uncle Sam gets less.