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I don't know exactly how the IRS does it but up here is the CRA and my
understanding is that they have some sort of formula to estimate the tip
income that would be expected for a server. My son was waiter in bar
for a while and later managed bars. At one time one of his cousins
worked for him and the guy was making a lot in tips and apparently not
declaring them all. He got audited and ended up owing thousands of
dollars in income tax. This nephew had worked part time as a waiter
while studying restaurant and hotel management at university. After
graduation he kept waiting tables for years because he was making so
much more than he could have as a manager.
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