Legal Question in Tax Law in Texas

Tax Tort?

For 2 tax years, I was a tipped employee in a restaurant where the GM mandated that we all claim only 10% of sales or the amount of our charge card tips, whichever was more, as income. Actual amounts were 20-30%. Tip-pooling meant that we all had identical tip-claims per shift, and any deviation from the GMs tip-claim formula was not allowed. I went around and around with the GM about it--5 or 6 times. I showed him articles on the Fler d'Italia case, told him I didn't want to do it, etc--he just didn't wanna hear it. I originally filed the first years fraudulent W-2, then decided that was the wrong choice and refiled the 1040x and claimed all tips, and filed the 1040 for the 2nd tax year also claiming all tips, and explained the evasion scheme to get ''not recommended for prosecution''. The IRS waived all my penalties except the late penalty.

Does the GMs action constitute Breach of Fiduciary Duty? Since I have a statutory duty under 6053 to report, what can be done when restaurant management blocks me from performing that duty?

This caused me a lot of problems. Besides constant nervousness about the criminal implication, it took many, many hours to reconstruct my W-2 and figure out the income and employment taxes, etc.


Asked on 1/04/05, 1:27 am

1 Answer from Attorneys
Barbara Lamar Law Office of Barbara Lamar

Re: Tax Tort?

Section 6053of the Tax Code requires tipped employees to keep their own records and report their earnings to their employers. Section 6652(b) says that if a failure to report as required is due to reasonable cause rather than wilful neglect, then the employee will not be subject to the 50% fine.

Your duty as a tipped employee is merely to keep records of your earnings and to report them to your employer. What the employer does with the information is not your responsibility, though if the employer did not make adequate employment tax payments on your behalf you certainly have a cause of action against him.

You'd also have a valid complaint if you were fired for refusing to break the law.

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Answered on 1/04/05, 2:07 am


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