'Tis the season to reward those who've given you good service all year with a little extra. But in this tough economy, you may not have as much to spread around as you usually do.
So, in this column, The Early Show's resident financial adviser, Ray Martin, offers tips for lean times.
With the economy in recession and holiday spending down, more people will need to take a step back from all of this and think long and hard about tipping.
In general, it's customary to tip people who reliably served you all year long, making your life better, easier, or safer in some way. So of course, you want to recognize that service if you can.
But what's appropriate, and what are the guidelines, particularly when you're feeling strapped for cash?
If you do plan to give tips this year, these are a few rules of thumb:
Don't Always Give Cash: When talking about tipping, cash is king, of course. However, it's probably not appropriate to give cash to everyone on your list. It may conflict with professional or ethical standards for folks such as your lawyer, financial adviser or accountant to accept cash tips. Also, think about other situations - what's the message when you give your child's teacher $25 cash? It may create the appearance of a payment for preferential treatment for your child.
As an alternative, consider taking up a collection with other parents to purchase an office supply or book store gift card. Also, keep in mind that postal employees and other civil servants are not allowed to accept cash, gift cards or anything worth more than $20.
Don't Be Too Personal: If you choose to give a gift instead of cash, make sure it's appropriate for the situation. Anything too personal might send the wrong message and make the person receiving your gift uncomfortable.
Don't Tip Everyone: Business owners who employ the people who provide a service for you don't expect tips, and receiving one could even be awkward for them. Remember that they are rewarded all year with your patronage. Instead, direct your tips to the owner's most deserving employees.
Don't Expect Special Treatment: Giving a tip is a way of showing appreciation, not a request for preferential treatment or service. On the other end of the scale, tipping does not make up for being a rude customer!
Don't Go Into Debt: You should never feel pressured into giving a holiday tip. Also, don't feel that you have to increase your debt or deplete your emergency fund to make tips. If your financial situation doesn't allow for tips, send a personal note of thanks to the person or their employer instead. If your financial situation improves after the holidays, you can consider giving a tip at that time.
Think your budget doesn't have room for tipping? According to the National Retail Federation, holiday shoppers plan to spend at least $120 on themselves; cutting back there could make room for some well-deserved tips.
Holiday Tipping Etiquette, From The Emily Post Institute:
Tipping and Taxes: Remember that, generally, tips are not tax deductible. However, there is a possible exception: Donating school supplies may qualify as a charitable deduction. You can only deduct the amount/value of your contribution that is more than the value of the benefit that you or your dependents receive. In other words, if you give supplies that will benefit your child, you can only deduct the value of the supplies that do not benefit your child. Another possible tax-deductible gratuity: Charitable donations can be given to the neighborhood police or fire department by donating to their widows and orphans fund.
If you receive tips, keep a daily tip record. Don't report service charges that your employer adds to the bill. These are W-2 wages. You should report tips you receive to your employer. Your employer can then withhold taxes and report the proper amount to Social Security, which affects the benefits you will receive when you retire.
You may be exempt from reporting tips if it's not customary to tip for the service you provide. The IRS may be willing to concede that additional payments received for normal services may not be tips and may be tax-free gifts from the customer.