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Tips For Tips: Who And How Much

It's the time of year to recognize those who helped to make our lives a little easier and who delivered reliable and exceptional service all year long.

Yes. That means tips. The Early Show personal financial adviser Ray Martin has information that might help you.

Most people will give holiday tips to people who provide services such as child care, housecleaning and newspaper delivery. According to a recent Consumer Reports Survey, only 42 percent surveyed say they will refrain from giving any holiday gifts or tips to commonly used service providers. With holiday spending forecasted to be up by 6 percent, the bet is that most people will also increase their holiday tipping.

So if you do plan to give tips, you'll want to do so tactfully.

  • Don't Always Give Cash. With tips, cash is king. However, it's probably not appropriate to give cash to everyone on your list. Salaried professionals may take offense to cash tips.

    Plus, what are you saying when you slip your child's teacher $25? It may look like a bribe for better grades for your child. In such cases, a gift card for classroom supplies or for use at a bookstore may be more appropriate. Also, keep in mind that postal employees and other civil servants are not allowed to accept cash 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 environment. Anything too personal might send the wrong message and make the person receiving your gift feel 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 meant to be a show of 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 to make tips. If your budget doesn't allow for tips, send a personal note of thanks to the person or their employer instead.

    Think your budget doesn't have room for tipping? According to the National Retail Federation, holiday shoppers plan to spend at least $90 on themselves. Cutting back here can help allow for making some well-deserved tips.

    Holiday tipping etiquette updated for 2005 by the Emily Post Institute:

    • Baby sitter: a night's pay and a gift
    • Day-care provider: $25 to $70 and a gift
    • Au pair/nanny: a week's pay and a small gift from the children
    • Housecleaner: a day's pay
    • Building staff: $20 to $100
    • Trash collector: $10 to $30
    • Paper deliverer: $10 to $30
    • Hairdresser: $10 to $60, or price of one treatment
    • Fitness trainer: cost of one session
    Tipping And Taxes
    Remember: 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 if it's 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 charitable donation 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. Do not 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.