The Agony and the Ecstasy of Low-Level Tax Evasion
I worked as a waitron at a chain restaurant more than a decade ago, around the time the word “waitron” was championed, lampooned, and promptly forgotten. I was just out of college, hanging around a pissant town while I waited to see how a romance played out.
It’s the one and only time I’ve underclaimed on my taxes, more out of laziness than a sincere intent to defraud. If when I cashed out for the night, I estimated my cash tips based on my total sales and credit card tip rate, it saved me maybe 10 minutes of counting small bills from my take-home stack. It saved time on the front end too; I started each night with a bankroll of personal cash from which to make change, and I didn’t have to count that either, or remember and subtract it later.
My accomplice in this scheme was the restaurant’s computer, which helpfully told me my credit card tip total; on a bleary night, I could punch in cash tip revisions until my combined percentage seemed plausible. I’d guess during my three-month tenure, I evaded tax on, at most, a thousand dollars, of which all but $80 in payroll taxes would have been returned. (I was well below the poverty line that year.)
The flaw in my shortcut, which I could have fixed but didn’t bother to, is that my average cash tip was higher than my average credit card tip, for a lot of reasons: plenty of people who pay with credit cards tip with cash; cash tippers round up to the nearest dollar; flamboyant big tippers use cash for the drama — and the opportunity for the waiter to underreport it, to treat it like a gift instead of earnings, which isn’t really a lie. An auditor would have known that, but it wouldn’t have been worth her time — not for $80, not with a meager paper trail. (Hit this number, I was told in training, and the IRS won’t bother you. We’re not telling you to lie of course…)
At the time, I was living in a spare room in a house that would be condemned and then demolished the month after I left. (The slumlord tried to shake my housemate down for a “repainting fee” until he waved around our copy of the teardown notice.) I bought most of my food at cost from the restaurant. I could have lived on a shift per week, and I gave a lot of my money to coworkers in the form of loans I knew they wouldn’t pay back — help with medical bills, emergency payments so a car wouldn’t be repossessed. I wasn’t making a lot, but my costs were nonexistent.
Money in general seemed fictional, approximate. I spent most of my free time writing a couple of incomplete books which I later lost in a divorce (in the literal sense; I misplaced a stack of files while dividing our stuff. Since I’m pretty sure they were accidentally thrown away and will never be seen again, I feel confident telling you these books were brilliant.) When I moved away, it was abrupt, and I left no forwarding address. I wanted to make sure those loans stayed unpaid.
Absent those aberrant three months, I’ve mostly overreported my income in small ways, like not subtracting my expenses. I’d like to say it’s because I want to support social programs (I do) and am grateful for the opportunities my country has given me (yep). I’d like to say it’s a shrewd calculation to goose my someday social security disbursements, or inflate my creditworthiness next time I need a loan. But as with the tips, it boils down to laziness: I don’t want to keep receipts or guess what percentage of a paint tube went toward a paid project and what percent made a mural on my wall. I still think of money as slightly fictional.
Lately, I’ve wondered how other people who work in partially cash-compensated professions thread this needle. So I asked some. (Identifying details have been changed, but any numbers are real.)
I’ve worked in hair for more than 20 years, at least two of them totally off the books thanks to owners who did no taxes even for themselves. Once, I switched salons specifically because I needed a W-2 for school loans and grants as I was in college. I was lucky to find that. A lot of owners use commission employees as 1099 contract labor, versus paying and matching the taxes for them. Some places, it’s not even that; even though they’re setting your prices and doing your bookings, you’re renting the chair from them like it’s a commercial kitchen. That’s the position I’m in now. I pay around $1,500 a month for supplies and booth rental.
At a long ago salon we used to call the trunk of the owner’s car “the rolling ATM,” as we just used money as it came in. Way stupid, but it was what it was. I never used to count tips much. I have an iPad app now that tracks clients’ spending over each year, and I list their tips as “products” so I know where money comes and goes. Tips are around a quarter of my take-home pay. Usually/sadly I only report my credit card income, plus sales of shampoo and stuff. Cash and checks, I’m super sketchy with, honestly, as I live in debt and bill-to-bill. I file once a year with my spouse and hope the IRS ignores me.
When I started out, there was an older woman, 40s (older to me then), and she basically said, “You need to do this or they’re going to look at you. Report at least this much. You could report everything, and the advantage to doing that is if you get hurt you will make more from that.” I didn’t get what she meant at the time — I thought it had something to do with worker’s comp — but she was talking about disability benefits. Not a lot of waitstaff make it to age-65 retirement. Too many ways to get hurt through accidents, or repetitive stress, or lifting heavy things bent over a table.
For all the things I’d seen at that point in my life, the thought of underreporting my tips made me feel so guilty. And at first I didn’t do it, but after a few months I did. And I really wrestled with that, because I was such a rule-follower. It really bothered me that I wasn’t telling the truth. I only kind of ran with it because I decided — to be honest, most of the people there were really beat down. There was one woman, 22, eight months pregnant, working 16-hour shifts. It’s a miracle that girl did not miscarry. I hope she had a healthy child, you know? What she went through — the busboys used to tell her, you don’t have to pay us. Save up. You have a kid on the way. Those guys, they were poor themselves. Some of us were so poor that we would go to the back kitchen and ask if they had any leftovers, things that they could reasonably say, “this was going to get thrown out anyway; I could slip it to you.”
So I kind of adopted “when in Rome” and followed other people’s approaches, because I realized, kind of in a way for the first time, that I was not rich. I mean, there were times I went hungry as a kid, but I had that “pull yourself up by your bootstraps” mentality where you’re not supposed to ask for help. And, like, you know what? This is my survival money. This is my chance to get ahead, you know? This is a tiny amount of money that will make a big difference to me. If I don’t work to take every advantage I can get, I am always going to be poor. And I have got to figure out what to do with my life.
To this day, I can remember her saying, “this is the risk you’re taking reporting your tips. You’ve got to make your call. And I know we don’t have a lot of money, and this is the situation we’re in.” And it really drove it home.
As far as myself claiming things, I just estimated based on the salon and my earnings. Mostly, I claimed credit card tips, but one owner told me to claim 20% of what I thought my cash tips were. I know of no hairdresser who goes higher, but that’s not saying much. Basically, I smudge the whole thing — there’s not a way for me to even know what I actually earn other than writing it down daily, as I’ve not worked for anyone that kept track and gave me a printout. My cash I very rarely put in the bank, and I don’t even consider it “real” — it’s fun money or sometimes emergency money. It’s a phantom presence.
My last two salons, I’ve been salaried (but still an independent contractor), so I do zero cash tip claims and deduct a lot of business expenses. But I somehow owe the IRS more than anybody else. Stylists are always shocked. It’s not like I’m in a high bracket, and I always hang on to my receipts and pay someone else to do my taxes because I’m clueless. I basically have just asked past tax preparers what I should claim based on my paperwork. I’ve owed over $10,000 for several years, and I can’t get a payment plan smaller than $500 a month, which doesn’t work for me. So basically I’m racking up this extensive bill that’s just waiting to crush me.
It would be so easy for me to hide income from my private clients; if they’re not through an agency, there’s no record of the lesson. I’m paid in cash, and I charge on a sliding scale, so even if you knew I met with someone, maybe it was a freebie, maybe it was $20/hour, maybe $100. But I claim everything because my wife would flip out if she thought I was hiding money from her, and she’s the one who does our taxes (and sticks the money in a 401(k), where it’s tax-deferred). Otherwise, it would probably be an off-the-books side hustle.
My manager encouraged me to hide tips—to report very low tips. The only thing they told me was to claim enough to make minimum wage. I already made minimum wage since I was a busboy, but I also got tips. I never reported them. I was in high school, though. I didn’t file taxes for the first time until I was 17 or 18, when I was doing my FAFSA. I’d been working for a couple of years, but my mother wasn’t filing taxes at that point (she was depressed) and it didn’t occur to me to file for myself. I think I maybe looked at the paperwork once and thought it was daunting.
The company doesn’t report tips for us — they could, easily, since it’s a tip pool and the managers divvy it up. But they don’t, the implication being “do what you want about it.” So I never report them myself. There’s something humiliating about having to count money that won’t pay your bills. To me, it’s always a little galling to ask for this careful control over pennies. If I was a corporation, it makes sense, but it’s really strangely humiliating for me as an individual. I’m too poor to pay taxes, so I’d be going to the effort of reporting it for form’s sake alone.
My takeaways at this point:
1. It’s intimidatingly hard to report your taxes if you’re a private contractor, particularly if nobody’s shown you how it looks for a normal/legitimate person in your field, and particularly if you have a high school degree or less.
2. Being poor is exhausting.
3. On the one hand, I think we’d all agree that underreporting your tips is illegal, but low-level illegal that falls somewhere between “I smoked a joint once” and “when it’s 3:30 a.m. and the street is totally empty I don’t always come to a full stop at an intersection.” On the other hand, if I tip the barber a little extra and say “Merry Christmas,” that’s a year-end taxable bonus, but if I wait until an hour after the haircut and hand over the same amount of money in an envelope which says “Merry Christmas,” that’s a present and is untaxed. The lines are not so sharp.
This is, in my mind, yet another reason to get rid of tipping and instead make wages more realistic. We’re offloading a complicated moral and financial calculus onto a group of people who are generally low-income and without labor protections. If you don’t pay all your taxes, you’re a liar and a cheat and maybe the IRS will come get you. (What this “getting” involves is ambiguous. Maybe it’s asking you for more money than you have, or throwing you in jail. It’s definitely not in the same category as a speeding ticket. Nobody I talked to knew exactly what the threat was. It was simply a boogeyman.) If you do claim your tips, you’re a chump giving away money everybody tried to let you keep, and maybe you miss an important bill without that extra $20 and get in trouble that way.
Maybe the fact that the IRS doesn’t audit a lot of waitrons — or at least isn’t reputed to, even though we all know waiters hide tips — is a sign that they recognize the strangeness of this boundary case: neither fish nor fowl, neither gift nor wages. Maybe the IRS knows how bad the press would be, and that you can’t squeeze blood from a stone. Or maybe, just maybe, the IRS agrees with me that income is a little bit fictional.
Romie Stott’s genre-bending fiction and poetry have appeared in Arc, Farrago’s Wainscot, Strange Horizons, Punchnel’s, Dark Mountain, and LIT. As a filmmaker, she’s been a guest artist at the National Gallery (London), ICA Boston, and Dallas Museum of Art. She has a bachelor of science in Economics.