Mon, Aug 29, 2011 Posted by Eric

If you have poor or weak credit and much of your pay is based on getting tips it is essential your report all of your tip money in order to have the best shot at getting loan approval.

People employed in the restaurant or hospitality industry have different views or approaches on tips.  Sometimes the cash tips are simply pocketed and not reported on tax returns.  More often, some of the cash tips are reported for taxes and some is not.  Some call it a half and half approach.  Granted, most servers that get tips are paid less than minimum wage because they get tips but are often the employer holds back the amount for taxes as if they were paying ten dollars per hour.  This is normally the reason at least half of cash tips are not reported.

Since tips go up and down depending on how business is doing where you work, what time of the year it is, the current economy, etc., it is important to show a steady flow of income.  That is what finance companies for bad credit auto loans are looking for: consistent flow of income monthly.

Now you need to purchase a car, your credit is bad and some or most of your pay is in tips.  What do you do?  The first thing to do to keep track of your income is to follow the IRS guidelines for tips which are: keep a log everyday you work of your tip money; let your manager know what you made in tips; list all your tips for the tax year on your tax form.  Since more and more folks are using debit and credit cards when going out they are often putting the tip on the card that automatically gets reported.  Cash tips are the tips you have to track.  You can also download a form from the IRS designed to list daily tips.

Sure, it is not fun to report cash tips but it is legally required and it will also boost your documented income increasing your likelihood of getting a bad credit auto loan.

Dealers that affiliate with bad credit auto finance companies will use your W-2 form as your total income and proof of income.  If your cash tips are not on your W-2 the finance company will not consider them.  Normally, in order to be granted a bad credit auto loan you need a pre-tax income of 1,500 to 1,800 dollars a month.  Next, after income, they look at your monthly bills.  That is why you need as much income on the W-2 form as possible.