If my employer taxes my tips, is that legal?

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If my employer taxes my tips, is that legal?

Asked on August 30, 2012 under Employment Labor Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Tips are supposed to be taxed--they are income, and are NOT tax-exempt (even though many people try to treat them that way and fail to report them).  If the employer is taking the appropriate withholding out of your tips (e.g. the ones paid via credit card bills, where the money goes to the employer and they then remit it to you) and properly passing the money on to the government, they do not appear to be doing anything illegal.


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