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Sep 4, 2013 08:11 PM

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

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:

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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)