Do I have to pay tax on tips in my minimum wage restaurant job?
Q: I work in a popular Dublin restaurant for the minimum wage. My tips form a big part of my weekly income. But my employer recently said that the tips that come through the card machine are taxed through our payroll. Is this normal? Also is there any law that protects service industry workers' rights to keep their tips?
A: While it is understandable that tips might seem a perk of the service industry and stand outside of a tax obligation, the reality is that any extra income earned outside of your PAYE income must be declared and tax paid on it.
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It is an individual's responsibility to pay any tax owing on tips, according to the commercial director of Taxback.com Eileen Devereux. This means that if you do regularly receive cash tips throughout the year, you should start to keep a record and declare them on what is called a Form 12, available through Revenue.
Tips paid electronically through card payments or service charges pass through payroll by your employer, and Revenue extracts tax on this income as part of normal taxation policy.
There is no law that stops employers from keeping tips, and there is no shortage of horror stories out there about workers being exploited by employers in terms of tipping culture.
A bill that will make it illegal for employers to take their workers' tips passed the Committee stage of the Seanad in February with all-party support. If passed, this new law would make it illegal for employers to withhold tips from their employees, making it compulsory to display tipping policy on the menu so that there is full transparency for customers. Only credit card tips will be withheld by the employer who will make sure they are taxed correctly, Ms Devereux said.
Q: My new employer has confirmed that it provides DeCare Dental insurance and VSP vision care insurance for me, in addition to fully-paid health insurance. Given that I will be charged benefit-in-kind on all three plans, I am wondering if the dental and vision plans are worthwhile or is this just over-insurance?
A: This is a very comprehensive healthcare package that's on offer from your employer, according to Dermot Goode of TotalHealthCover.ie.
He recommends that you avail of all three policies to maximise your overall cover. For example, the DeCare dental corporate plans are very competitively priced and if you need any type of routine treatment during the year, the benefit you will receive will more than off-set any benefit-in-kind (BIK) cost.
Also, it's worth noting that no health insurance plan covers major dental treatments such as crowns, root canal etc, but these are all covered to some degree under the dental scheme. The VSP cover is also very attractive in that this policy covers most costs associated with eye-care such as eye tests, glasses, frames, lenses etc up to your plan limits, Mr Goode said. These schemes are very competitive in terms of price and benefits and they are only available through employer schemes, he said. he key with these complementary healthcare policies is that you need to use the benefits to make them worthwhile, for example, getting your teeth checked twice a year and getting your eyes tested annually.
Q: I am looking to buy my first car and have been offered finance by the garage but it seems a little expensive and inflexible. I have heard, on the radio I think, that credit unions are good for lending rates but have never dealt them before. Do I need a long-term relationship with them before borrowing €5,000 for my car? Do I just go to the credit union closest to me?
A: In simple terms, credit unions want both your lending and savings business, but generally don't tie them together as they may have done in the past.
You can approach many of them through social media, by phone or by calling in, according to the chief executive of the Credit Union Development Association (Cuda) Kevin Johnson. There's no 'interview' and the requirement to have a saving history with them is generally no longer a prerequisite. You will be asked basic details about yourself and your capacity to repay a loan. Providing you can show that you will be able to pay the loan in the agreed time and in full you should be alright. Approval is now measured in hours rather than days as was previously the case. A benefit of credit union loans is that they are completely flexible with no charges or penalties for early repayment or extension, Mr Johnson said.
No health insurance plan covers major dental treatments such as crowns, root canal etc, but these are all covered to some degree under a dental scheme.
If you regularly receive cash tips throughout the year, you should keep a record and declare them on what is called a Form 12, available through Revenue.