IRS Rules Change Related to Automatic Tipping

Advanced POS SystemsMany restaurants including Olive Garden, LongHorn Steakhouse and Red Lobster charge an automatic tip to larger parties.

For example, some restaurants add a 15%, 18% or even 20% tip to parties of eight or more.

Some restaurants automatically add a tip for all patrons.

The IRS has a new ruling going into effect 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.

This means more paperwork for restaurants and probably less take home pay for employees.

Read the entire article in the Wall Street Journal at:


IRS Rule Leads Restaurants to Rethink Automatic Tips


Read more about the new tipping law at:


NY Times Restaurant Critic Rips Tipping Rule (Consumerist)

or in the Orlando Sentinel

Automatic tips may be off the table



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