It is after all a business cost. We claim tips based on sales. We tip out based on a percentage of those same sales. It comes out to roughly $50 a week. Over the course of the year thats $2,600. Surely there’s a legal way to get some of that back.
If there is a way to do it, how would I go about filing using the 1040 E Z?

You have apparently blown it.

You report the tipouts when you report your tips to your employer. That way everything is properly reported on *all* of the W-2s. There is no other way to do this. The IRS will not allow you to deduct the tipouts because they have no way to attach them to the tax return of the support staff.

Here’s the official IRS info:
4.12 Interest/Dividends/Other Types of Income: Tips

Of my allocated tips, I tip-out 15% to the busboy and 5% to the bar. Where do I deduct this on my tax return?

You cannot deduct tip-outs (the tips you split with other employees) on your tax return. Nor can you deduct them from your allocated tips. The practice of tipping-out is one of the reasons you should keep a detailed daily log of your tips. If you documented that you tip-out, and you reported all your tips to your employer, then you do not include in your income the allocated tips in box 8 of Form W-2 (PDF).

Tipping-out, by itself, should not cause an allocated tip situation. First, when you report the cash tips you receive, you should report the total tips, then the amount tipped-out. Publication 1244 (PDF), Employee’s Daily Record of Tips and Report to Employer, includes Forms 4070 and 4070A, Employee’s Report of Tips to Employer that provides lines to record:

Cash tips received
Credit card tips received
Tips paid out
Net tips

The detail of the information provided should enable your employer to develop a reasonable, fair, and accurate method for determining whether tips need to be allocated, and, if so, how much. Employers who operate large food and beverage establishments are only required to allocate tips if the total tips reported by all the employees who customarily receive tips are less than 8% of gross sales. Thus, when there is a tip-splitting arrangement, it is important that all tips, including those received through tip-splitting, be reported to the employer by each employee who receives $20 or more in a month.

For more information, refer to Publication 531, Reporting Tip Income.