Help Wanted: Tips paid by credit card are taxable

DEAR CARRIE:

My two sons receive gratuities as part of their jobs. One is a waiter in a restaurant and receives 100 percent of his tips, even when they're paid by credit card. On the other hand, when my other son, who works for a limousine service, receives tips, 2 percent is subtracted to cover the company's credit card fee. Are there any laws regarding employer's deducting money for credit card sales? Also, are taxes collected on the tip?

- Tips on tips

DEAR TIPS: Both practices are legal, according to the New York State Department of Labor and the IRS.

"The employer may deduct the credit card fees from the tip paid by credit card," according to the labor department.

So whether the tip total someone receives reflects a credit card fee depends on the generosity of an employer such as the restaurant where your other son works.

As for taxes, the IRS says that if you receive $20 or more in tips in any one month, you must report all your tips to your employer. Your employer, in turn, is required to withhold federal income taxes and Social Security and Medicare taxes.

DEAR CARRIE:

My 401(k) plan forces plan participants who own company stock to reinvest dividends in the stock. Otherwise, the plan will distribute the dividend, which is taxable, to any participants who do not want to reinvest. Is this legal? I have contacted several federal agencies, but neither has answered my question about whether the practice is legal. Can you help? - Legal tax?

DEAR LEGAL: I checked with the IRS, and the practice is legal.

"It sounds like the reader is referring to a 401(k) plan with an ESOP [Employee Stock Ownership Plan] feature," a spokeswoman said. "In that case the employer is correct in advising the employee that she must reinvest the dividend in company stock or the dividend will be distributed, causing a taxable event."

She said that you might want to look into whether the plan will allow you to reallocate a portion of your account to another investment option within the plan once the dividends are reinvested.

DEAR CARRIE:

I am an operations supervisor for a trucking company. When I was hired, the company said my salary was based on a nine-hour workday. But since I started, I have worked no fewer than 10 hours a day, and I work all different shifts. I don't even get a lunch break. I eat at my desk while I work. What are my rights since I am considered management. - Bamboozled?

DEAR BAMBOOZLED: Yours is a frequent complaint among new managers in particular. The good news is that your boss, by law, must give you a meal break of a least a half-hour. That's true for all employees who work more than six hours a day, regardless of their title. Companies don't have to pay workers for the meal break but must give them the time.

The bad news is that if you are a bona fide manager, your company can work you any number of extra hours and doesn't have to pay you for that added time.