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The end of automatic gratuities for "Parties of __ or More"?

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From the WSJ in an article titled: "IRS Rule Leads Restaurants to Rethink Automatic Tips"


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.

Read it here: http://online.wsj.com/article/SB10001...

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  1. I for one am not a cheat, yet I do like the option of 'flying under the radar' on occasion.

    never liked the mandatory tip - just call it a service charge (but then a table of 6 or more is a pain to serve and more likely to stiff on the gratuity)

    1. I'm fine with adding gratuity to all checks.

      1. Automated tips actually lead to smaller tips from me - I normally round up so I end up tipping more, but I tip as I'm told when it is automated.

        Once when I was trying to add to the automated tip, I was actively discouraged from doing so!

        1 Reply
        1. re: content

          I once went to a restaurant, and they added a 15% autogratuity. I thought that was too low and wanted to add to it, but I paid by credit card, and the slip had no place to write in additional tip. I had never seen that anywhere other a fast food joint.

        2. I would just like to say that I have a very high admiration for the individuals who work at the IRS and the utmost respect for the entire organization. It is with pleasure and a feeling of great civic duty that I pay my taxes. Sometimes I wish I could pay MORE than my share of taxes as a contribution to this outstanding institution!

          (do you think this could make it on the sarcasm thread on the NAF board????)

          1. What's a few more pages of tax code when it's already 71,684 pages long? (year 2010)

            1. Ipse...I know you are an attorney....and you know I am a plumber with 100 employees..in Flushing , NY. I state this only for a point of the discussion here...we look at this in the eyes of our respective experiences..

              Gratuities or tips for service have become part of the hospitality industry, that is an essential compensation element for persons providing a "acceptance/delivery service" for a meal, be it sustenance or a luxurious experience.

              Why can't the IRS leave it alone?
              Next they will charge us a tax for every e-mail or text we send....Actually they do it to us now! Just look at your monthly bill..

              The structure of gratuities, was established in the 1930's during a period of labor reform..perhaps it is time to re-examine policy and laws....but an arbitrary ruling..by one of the most powerful agencies in this country;that is a no..no

              I recall when the IRS allowed you deduct finance charges off to your tax return...the IRS sucked you in to not use cash but credit cards...so that some day they would create a cashless society and they could know what you were doing financially , by the second...sounds like George Orwell?...but it is here and I am witness, having lived through it!