Waiters and Waitresses Prefer Tips Stay Off the Tax Bill

We’ve all been there: you receive your bill at a restaurant and you look at it, perplexed, because it seems higher than you expected. Then you realize the restaurant tacked on an 18% gratuity because you’re with a group of eight or more. Well, come January 2014, the IRS has decided to count automatic gratuities as services charges. For waiters and waitresses, that means those tips would be counted as wages and will be subject to payroll tax. For employers, that results in the collected service charges being included in both gross revenues and salaries and wages, which would be subject to normal withholding requirements.  On the heels of this decision, more and more restaurants have decided to do away with automatic gratuities. But as anyone who has worked in the hospitality industry will tell you, just because it’s not automatically on there doesn’t mean you should stop tipping, either! You can read the full article on the new tax rule here.