The Internal Revenue Service in 2014 will enforce a new rule that will require restaurants to recognize automatic gratuities added to large parties as taxable wages and not as tips.
This means waiters will no longer be able to take automatic tips home with them and it could also mean the discontinuation of the automatic gratuity.
“This new IRS rule is one more mandate to comply with and one more way to make sure the IRS extracts every possible penny out of hard-working waiters and small business people — the very folks who are suffering most in this weak economy,” Daniel Garza, executive director of the LIBRE Initiative (a right-of-center Hispanic group) said in a statement on the rule.
The rule could also lead to restaurants discontinuing the practice of adding an automatic gratuity to large parties (usually five patrons or more).
“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,” the Wall Street Journal reports, citing a spokesman familiar with the situation. http://www.theblaze.com/stories/2013/09/09/new-irs-rule-goes-after-automatic-tips-for-waiters/
The IRS can go straight to hell