DH works at a restaurant in a major hotel chain. Tip calculation for income tax reporting is done as follows:

- His sales x 8% = minimum reported tips.

- If non-cash tips (credit cards, room charges, etc) is more than the 8%, then the actual amount of those tips, plus any cash tips reported, is what is added to his gross pay for the week.

- If non-cash tips + cash tips reported are LESS than the 8%, then then the actual is reported and the difference between actual and the 8% is reported as "allocated" tips.

Seems to me that if you have "allocated tips", it triggers some sort of federal income tax penalty for not reporting the full amount of tips.