Author: Mike Rowan

It’s no secret that tax season is confusing and stressful, especially when you work in the hospitality industry. Many restaurant employees — whether they’re newbies or seasoned pros — aren’t exactly sure what’s required when it comes to reporting their income and filing taxes. There tends to be a lot of misconceptions particularly when it comes to reporting on tips received.

Maybe your employees are asking questions, or maybe you have a hunch that they should be asking questions. If that’s the case, we’ve taken the liberty of answering a few FAQs that your staff might find helpful. (Obligatory disclaimer: Of course, this is not intended to be tax, legal or accounting advice, and it’s always best to point them in the direction of a certified tax pro if they need help!). 

1. Do I have to report my tips to the IRS? 

Short answer: yes. 

Employees are required to report all income, including tips received while working at a restaurant, on their tax returns. This includes cash tips, credit card tips, and tips received via electronic payment platforms. 

Accurately reporting your income, including the tips you’ve earned, ensures that you avoid penalties and legal issues. But it’s not just about ensuring “Uncle Sam” gets his due; it also behooves you to avoid underreporting your earnings. More on that in a minute…

To make things easier, it’s advisable to keep detailed records of your tips to ensure accurate reporting come tax time. (If you’re a Kickfin user, of course, that’s easy to do!)

These days, you probably receive tips from customers in one of two ways: either they add a tip via credit card when they pay the bill, or they’ll leave a cash tip. Here’s what to know about reporting credit card tips and cash tips to the IRS

Reporting credit card tips

Most restaurants use POS systems to run their front-of-house operations. When customers leave tips on credit cards, they’re getting tracked in the POS and reported to the IRS by your employer. As a result, those tips are going to be included on the W-2 or 1099 that your employer gives you.

That’s because your employer is responsible for paying taxes on your tip earnings, too. In addition to paying payroll taxes, employers are required to withhold income taxes, Social Security taxes, and Medicare taxes on those employee tips, just as they would on other forms of employee compensation. They must keep accurate records of all tips reported by employees and include those amounts when filing employment tax returns.

(Keep in mind: this is the case for all tips left on credit cards, no matter how your employer is paying out those tips — cash, digitally, paycard or payroll. In other words, even if you’re leaving your shift with a wad of cash in your wallet, the IRS is well aware that you earned those tips, assuming your customers are primarily paying with credit cards.)

What’s more: because cash tips are less common and POS data is readily available, the IRS collects income information based on the credit card tips you input through their SITCA program. So, there’s really no way around reporting credit card tips to the IRS, and you’ll be liable for income tax on those tips. 

>> Learn more about SITCA and tip reporting

Reporting cash tips

This is where things can get a little muddy. 

It’s been common practice in the restaurant industry to under-report cash tips (or not report them at all). Technically, this is illegal. 

Bottom line: Employees are required to report all tips received when you file your taxes, including cash tips that were not run through your restaurant’s POS. Again, if you don’t accurately report your tip earnings, you could face financial and/or legal penalties. 

2. Does it affect my employer (and will they care?) if I under report my cash tips? 

Most restaurants are using the tip credit to decrease their monthly labor costs — so under reported tips could cause them some problems. 

Your employer’s biggest concern here is making sure that you earn at least minimum wage with the addition of your tips. If the majority of your tips are coming from credit cards, those are already automatically reported through your POS system, and your employer can track them for compliance purposes. But if you’re the rare server who earns more cash these days, then under reporting tips could cause a big spike in labor costs for your employer. 

In short, your employer probably won’t care if you don’t report all of your cash tips, but there are some serious reasons why you should…

3. What happens to me if I under report my cash tips? 

Leaving those cash tips untaxed might give you more freedom in the short run, but it could affect your future financial security. 

1. You run the risk of being audited. No, it’s not super likely, but there’s always a chance that the IRS may be suspicious of your reported sales compared to your reported tips. This discrepancy could cost you in the long run.
   
   
2. Unemployment and disability payments are based on wages. If you’re under-reporting your tips, it could hurt you if you ever need to rely on unemployment or disability (which many restaurant employees had to do during the pandemic). With your income artificially decreased, you’ll have to live off of much less than you’re actually owed.
   
   
3. It may be harder to make investments in your future. We know great servers who are raking in the cash… but when you’re ready to make a major financial move, you might not have the documentation to back it up. For example, you might love a house that is technically in your budget, but without proof of your entire income, you might not qualify for a sizable enough home loan or be able to prove that you make three times the rent.

4. How does my tip reporting affect my taxes? 

Ultimately, how much you report in tips will determine how much you owe in taxes — that’s kind of the whole point of reporting your income. The more you report, the higher your tax liability. 

5. Why do I owe taxes every year? Aren’t they supposed to be withheld from my pay? 

They are — but your hourly wage probably isn’t enough to cover your entire tax responsibilities. You might remember picking up several $0 paychecks throughout the year. 

This isn’t necessarily a bad thing: many financial experts say that it’s actually better to owe taxes when you file. That means you had more freedom to invest throughout the year, and that you weren’t offering the government a loan that they have to pay back in April. 

But we get it. That big tax refund is way more fun to see hit your bank account, and you might not be prepared to pay up if you owe. If you’re afraid that you’ll owe taxes (or panicking about where you’re going to get the money to pay them), here’s what you can do to ease your burden. 

• Set taxes aside each week. Even though you’re walking out with tips in hand (or in your bank account), that doesn’t mean they aren’t going to be taxed eventually. Each week, count up your tips and set 10-15% aside to save for tax season. If you have extra money leftover — take a vacation!
  
  

• Explore write offs and deductions. Did you pay for your own uniform? Or for a safe alcohol service course? Are credit card fees taken out of your tips? All of these are deductions that you can use to reduce how much you owe.
  
  

• Keep precise records. You’ll need to know how much you spent on work-related expenses and will need to back it up with documentation. If your employer is using Kickfin, your account is a great source of truth for all of your tip payout information. 

All of this reporting and recordkeeping can feel overwhelming — especially for servers who can’t remember how much cash they left with last night, let alone a year ago. Make sure your employees have all the tools they need to make smart financial decisions. Check out how Kickfin’s reporting can make life easier for managers and servers alike.

Restaurant training is a method for restaurant owners and managers to equip staff with the knowledge and skills they need to do their jobs. This training covers key areas such as customer service, food preparation, and safety procedures. Effective training is crucial as it enhances service quality, improves staff morale, and leads to a profitable and well-run restaurant.

What Is Restaurant Training?

Restaurant training is the process of teaching new and existing employees the things they need to perform their job duties effectively. This includes everything from learning how to use the equipment and tools in the kitchen to understanding menu items, serving customers, preventing foodborne illness, and reacting appropriately in emergencies.

Restaurant training isn’t limited to new employees. It’s also crucial for existing staff to receive ongoing training to keep up with changes, trends, and standards. Providing high-quality training is an investment in your employees and your business, as properly trained staff can boost the efficiency and productivity of your restaurant, improving customer satisfaction and profits.

Why Restaurant Training Is Important

Restaurant training helps restaurant owners and managers build a competent staff and create a good dining experience for patrons. Restaurant training is important because it can:

• Build skilled and motivated teams. Effective restaurant training ensures staff members have the skills and information necessary to perform their duties efficiently.
• Maintain consistency. Through proper training, your staff members can learn the correct procedures, techniques, and standards to maintain consistency in service and food. This ensures a consistent experience for customers every time they visit your restaurant.
• Improve customer satisfaction. Well-trained employees are better equipped to handle customer inquiries and complaints effectively. This improves customer satisfaction, leading to increased sales and positive reviews.
• Reduce employee turnover. Investing in your employees through training can also help boost morale and reduce employee turnover. When staff members feel valued and equipped with the necessary skills, they are more likely to stay with your restaurant. 
• Create growth opportunities. Good training also provides employees with opportunities for professional growth and development. Continual learning leads to increased knowledge, skills, and expertise, opening up new career opportunities within the restaurant industry.
• Ensure compliance with regulations. The restaurant industry is highly regulated, with specific rules and regulations that you and your employees must follow. Through proper training, your staff can learn the guidelines and procedures to ensure compliance with health and safety regulations, food handling standards, and other requirements.

Types of Restaurant Training

You can implement several types of restaurant training to ensure your team is efficient, confident, and ready to provide the best possible service. These are the main types of restaurant training and why each is important.

Basic Training

Basic training in a restaurant primarily involves orientation and familiarization with the employee handbook. This includes introducing new hires to the restaurant’s culture, values, and expectations. You can also use orientation to clarify job descriptions, roles, and responsibilities. 

Basic training also covers a thorough understanding of the employee handbook, which outlines the restaurant’s policies, procedures, and standards, along with information about employee benefits, code of conduct, and guidelines for addressing grievances. The handbook serves as a reference tool that employees can consult whenever necessary.

Front-of-house Training

Front-of-house training refers to the education and instruction given to employees who directly interact with customers – including bartenders, servers, hosts, and bussers. This training is vital as these individuals are the face of the restaurant, and their performance directly impacts customers’ dining experience.

The training typically includes modules on customer service skills, menu knowledge, and restaurant operations. It teaches employees how to interact with customers professionally, handle complaints, and deliver an exceptional dining experience. It helps staff anticipate customer’s needs and exceed their expectations.

Back-of-house Training

Back-of-house training is for staff members who work behind the scenes, including chefs, line cooks, dishwashers, and prep workers. This type of training focuses on culinary skills, food prep techniques, plating presentation, inventory management, equipment usage, and safety protocols. 

Such training can ensure consistency in food taste and presentation, leading to a more satisfying customer experience. Employees are also trained on proper food storage, temperature control, cross-contamination prevention, and cleaning and sanitizing procedures. This helps prevent foodborne illnesses, ensures the health and safety of customers, and maintains the restaurant’s reputation.

Technology Training

Technology training is an increasingly critical component of employee training in modern restaurants. It involves equipping staff with the knowledge and skills to operate and maximize the use of various tools, including point-of-sale (POS) systems, reservation systems, kitchen display systems, and digital menu boards. It may also cover mobile and online ordering platforms and social media platforms for marketing and customer engagement purposes. 

You should train employees not only on how to use these systems but also on troubleshooting common issues and understanding how these tools contribute to the overall operation and success of the restaurant.

However, technology training is not a one-time event. As restaurant technology evolves rapidly, you must regularly update training programs for new features or systems. 

Cross-training

Cross-training in a restaurant is the process of training employees to perform multiple roles within the business beyond their primary job responsibilities. For example, this might involve a server learning how to operate the bar, a line cook understanding the nuances of customer interaction, or a host gaining a general understanding of the processes and pressures of the kitchen. 

Cross-training is immensely helpful in creating a versatile workforce that can adapt to various situations and lend a hand when necessary. Furthermore, cross-training fosters a sense of teamwork and empathy among staff. When employees have a first-hand understanding of the challenges their colleagues face, they are more likely to collaborate effectively and support each other.

Restaurant Training Methods

The methods employed for restaurant staff training can significantly influence the effectiveness of the training program. Whether traditional face-to-face training, interactive online modules, or on-the-job training, the goal remains: to equip your staff with the necessary knowledge and skills to provide exceptional service and ensure smooth operations.

One-on-one Training

One-on-one training is a personalized approach to personnel development where a more experienced staff member – often an owner or manager – provides direct instruction to a less experienced employee. This training method allows for immediate feedback and ensures the trainee comprehends all aspects of their role. It can be used to cover everything from specific job skills to restaurant policies, customer service standards, and understanding the restaurant’s culture and values.

One-on-one training is particularly beneficial when new employees first join a restaurant staff and need to understand their roles and responsibilities comprehensively. It is also a good fit when an employee transitions to a new position, needs to improve specific skills, or when the restaurant introduces new equipment, software, or procedures. The targeted instruction and individual attention can help the individual understand and adapt to their new responsibilities or changes more effectively.

Group Training

Group training involves providing instruction to multiple employees simultaneously, often in a group setting or through seminars or workshops. This method can facilitate the sharing of ideas and experiences among participants, promote teamwork, and create a sense of camaraderie. 

Group training can be effective when you need to train many employees at once, such as during restaurant-wide policy changes, menu updates, or new system implementations. It also proves advantageous when reinforcing general knowledge or skills that apply to all staff, such as customer service principles or food safety norms. Additionally, group training can be a good fit when promoting team-building and enhancing internal communication.

Online Training

Online training is the use of digital resources to deliver training programs to employees in the restaurant industry. This method leverages digital platforms such as training software, videos, webinars, and virtual reality simulations to instruct employees on various aspects of restaurant operations. 

Online training may be a good fit in several scenarios within the restaurant industry. For instance, it’s particularly effective when training on theoretical concepts or standard procedures that do not require hands-on practice, like understanding company policies or learning how to use a new software system. It can also benefit ongoing learning, allowing continuous access to resources for self-paced learning. 

Which Method of Training Do Most Restaurants Use?

There is no one-size-fits-all approach when it comes to restaurant training. Every restaurant has unique needs and preferences, depending on factors such as the size of the staff, type of cuisine, and company culture. However, most restaurants tend to use a combination of one-on-one, group, and online training.

For example, one-on-one training is essential during the initial hiring process and when introducing new employees to the restaurant’s culture, values, and specific job skills. Group training is typically used for delivering standard information across all employees, promoting teamwork, and enhancing internal communication. Online training can be a convenient and flexible option for ongoing learning and development, especially in today’s digital age.

Ultimately, any restaurant’s most effective training program depends on its specific needs and goals. A well-rounded training program that incorporates a mix of one-on-one, group, and online methods can ensure that all employees receive comprehensive instruction and have the skills they need to excel in their roles.

How Much Does Restaurant Training Cost?

The cost of restaurant training can vary widely, depending on the type of training and the size of staff, the complexity of operations, and other specific business needs. Many restaurants may handle all training in-house, using their resources and staff members as trainers. In this case, training is often more expensive, requiring only the time of existing employees.

However, some restaurants may opt for external training programs that provide instruction to the restaurant industry. These programs may offer a broader range of topics and more comprehensive training plans, but they can also come at a higher cost.

For businesses that choose to leverage outside programs, the costs of training can vary significantly based on the types of training provided, the systems being covered, the complexity of the restaurant’s systems, and the number of employees being trained. Some providers offer packaged courses for a set fee, while others may charge per user or course.

The Importance of Ongoing Training

Comprehensive restaurant training ensures that employees are up-to-date with the latest information and equipped with the necessary skills to perform their duties effectively. This training can also improve employee morale and retention and enhance job performance, ultimately benefiting the restaurant’s overall success.

Effective training is a vital component of any successful restaurant. Whether through one-on-one sessions, group training, or online courses, investing in the development of employees can lead to improved job performance and contribute to the overall growth and success of the establishment.