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-Land of the Free
IRS Rule Leads Restaurants to Rethink Automatic Tips
2013-09-06
[ONLINE.WSJ] An updated tax rule is causing restaurants to rethink the practice of adding automatic tips to the tabs of large parties.

Starting in January, the Internal Revenue Service will begin classifying those automatic gratuities as service charges--which it treats as regular wages, subject to payroll tax withholding--instead of tips, which restaurants leave up to the employees to report as income.

The change would mean more paperwork and added costs for the restaurants--and a potential financial hit for waiters and waitresses who live on their tips but don't always report them fully.

Darden Restaurants Inc., owner of Olive Garden, LongHorn Steakhouse and Red Lobster, has long included automatic 18% tips on the bill for parties of eight or more at its more than 2,100 restaurants, but is experimenting with eliminating them because of the IRS ruling, said a spokesman.
Posted by:Fred

#3  Just a couple weeks ago the news was full of some restaurants getting away from tips. I assume automatic tipping built into the bill but perhaps they really just bury it in the price as to be non-tips. Wonder if this hits them as well.
Posted by: rjschwarz   2013-09-06 14:30  

#2  I generally tip higher than this automatic tips but when a restaurant includes the tip automatically I don't feel obligated to make up the difference. Its like, they decided already what the service was worth.

I know that is unfair to the wait staff because they are occasionally stiffed but its just easy to consider the tip paid when its embedded.
Posted by: rjschwarz   2013-09-06 14:29  

#1  An "Automatic Tip" Is nothing more than a mandatory price increase (Which the government taxes) it's NOT a "Supplement".

If I give to a waiter/waitress it's intended to go to THEM, not the government.
Posted by: Redneck Jim   2013-09-06 12:27  

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