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When I tip I prefer to do so in cash so they can just pocket it. When I was a dishwasher I remember the good, hardworking servers walking out every night with huge roll of bills, and they would go buy groceries without paying taxes on it.
I worked with someone like that until she wanted to buy a house. Banks looked at her claimed income and gave a hearty "lol, no". She started claiming all her tips after that. I don't remember what happened after that (this was like 2003ish)