5 My restaurant does something weird where they add an "assumed cash tip" percentage to our reported income even when we honestly report everything. Is that legal??

Been serving for about 2 years now and wanted to share what I've learned about cash tip taxes since I was in the same confused boat when I started! Yes, when you report cash tips on your checkout form, those get added to your total taxable income for that pay period. Your employer should then withhold taxes on ALL your tips (cash + credit card) from your paycheck. This is why you'll sometimes see really small paychecks even after a good night - the taxes on your cash tips are being taken out of your credit card tip money. One thing that caught me off guard early on: if you have a really good cash night but low credit card tips, there might not be enough in your paycheck to cover all the tax withholding. When that happens, you'll owe the difference when you file your taxes in April. My advice is to set aside about 25-30% of your cash tips in a separate envelope or savings account, just in case. Better to have too much saved than get hit with a surprise tax bill! Also definitely keep your own daily tip log - don't just rely on what the restaurant tracks.

Quick question - I have a settlement coming up for a car accident. I'm getting about $31k for my injuries and the insurance is paying my lawyer directly (about $12k). My lawyer said I won't owe taxes, but the insurance company mentioned something about sending a 1099. Should I be worried?

Based on what you've described, you're in a good position tax-wise. Since your settlement is specifically for physical injuries and the attorney fees are being paid separately and directly to your lawyer (not through you), you likely won't owe taxes on either portion. The key factors working in your favor are: 1) Physical injury settlements are generally tax-free under IRC Section 104(a)(2), and 2) Attorney fees paid directly by the defendant to your attorney aren't considered income to you. However, I'd recommend keeping detailed records of everything - the settlement agreement showing the separate payment structure, any documentation showing the attorney fees went directly to your lawyer's firm, and confirmation that this was purely for physical injuries with no punitive damages or other taxable components. If you want absolute certainty, consider having a tax professional review your specific settlement documents before filing. Every case has unique details that could affect the tax treatment.

I went through an audit for this exact situation about 3 years ago, so I can share what actually happened. I had been filing HOH while living with my grandmother and supporting my two kids. The IRS selected my return for review (I think because my income seemed low for HOH status). They requested documentation showing I was maintaining a household for my qualifying dependents. I provided: - Bank statements showing regular payments to my grandmother for "rent" - Grocery receipts (I had saved most of them) - Utility bills that showed I was paying the electric and internet - School records showing my kids lived at that address - Medical records showing I was taking my kids to appointments The auditor explained that they needed to verify I was paying more than half of the household expenses for me and my kids. Since I was paying $600/month to my grandmother plus utilities and groceries, and my kids' total support was clearly more than half from me, I qualified. The key was having some documentation, even if informal. The auditor didn't care that I didn't own the house - they just wanted proof I was financially responsible for maintaining the household where my qualifying dependents lived. The audit took about 4 months but resulted in no changes to my return. Start keeping better records now if you're worried - even simple things like taking photos of receipts with your phone can help establish a pattern of support.

This is really helpful information from everyone who's shared their experiences! As someone who's been in a similar situation, I wanted to add that it's also worth checking if your state has any specific requirements or interpretations for HOH filing status that might differ from federal guidelines. I discovered that my state tax agency had slightly different documentation requirements during an audit a few years back. While I qualified for federal HOH status living with my parents and supporting my daughter, the state wanted additional proof that I was maintaining a separate household unit within the family home. The lesson I learned is to keep records not just of your financial contributions, but also evidence that you're running an independent household for you and your dependents - things like being the one who takes your kids to school, handling their medical appointments, buying their clothes, etc. This helps establish that you're truly the head of your own household, even if it's located within someone else's property. Also, if your parents are filing their own tax return, make sure they're not claiming any expenses that you're actually paying for. The IRS can cross-reference returns, and you want to avoid any conflicts between what you're claiming and what your parents are deducting.

One thing no one's mentioned - if your spouse had other capital gains during the year, this loss could offset those gains. Worth checking your complete return to see if there were other investment transactions that might change how important this amendment is.

You should definitely file an amended return for the 1099-B showing the $600 loss. Here's why it's worth it: 1. **You'll likely get money back** - That $600 capital loss can reduce your taxable income by up to $600 (assuming you don't have other capital gains to offset), which could mean an additional refund of $60-150+ depending on your tax bracket. 2. **It's required by law** - The IRS expects you to report all 1099 forms you receive, even losses. Not reporting it could potentially cause issues if the IRS notices the discrepancy. 3. **You have plenty of time** - Since you just filed, you have 3 years to amend without any penalties. For the amendment, you'll need to file Form 1040-X and include Schedule D to report the capital loss. Most states will also require an amended state return if they have income tax. The amendment fee from TurboTax might sting a bit, but you'll likely come out ahead financially, plus you'll have peace of mind knowing everything is properly reported to the IRS.

Another option as executor: check if your uncle qualified for Currently Not Collectible (CNC) status. If he had financial hardship, the IRS might have placed his account in CNC status. This doesn't stop the 10-year clock, so the debts might have expired anyway. Also, if there were any IRS errors in assessment or collection, those could potentially invalidate the debt. It's worth having a tax professional review everything before you pay anything from the estate.

I'm dealing with a similar situation right now with my grandmother's estate. One thing I learned is that even if some debts have expired under the 10-year rule, the IRS might still send collection notices because their computer systems don't always automatically stop collection activities when the CSED passes. As executor, you have the right to challenge any collection attempts on expired debts. If you determine through the transcripts that certain tax years have passed their CSED, you can send a written response to the IRS citing the expired statute of limitations. Make sure to keep copies of everything and send any correspondence via certified mail. Also, don't feel pressured to pay anything immediately. Take time to get the transcripts and verify which debts are still valid. The estate administration process gives you some breathing room to sort this out properly before making any distributions to beneficiaries.