Untaxed Tipping? Detriment to Workers

The service industry put me through university as well. One thing I never do is leave a tip on a debit or credit card because here in Canada, the tax man tries to make service employees pay income tax on their tips. I find this really nasty…

This is a two-edged sword.

Untaxed tip income is also not income for employment insurance purposes, workers compensation benefit purposes, and for Canada pension plan purposes. Both EI and and WCB benefits are pretty common in the seasonal and/or intermittent service industries. Having untaxed income might be a matter of short-term gain for long-term pain.

On the other hand, untaxed tips benefit employers who can pay lower wages and avoid paying their portion of premiums for EI and CPP.