IRS Changing Rules on Automatic Restaurant Tips | News
If you've eaten at a restaurant with a large group of people, you may have noticed a automatic gratuity included in your check.
Next January, though, the IRS will begin classifying those automatic gratuities as service charges instead of tips, meaning they'll be treated as taxable wages.
According to the Wall Street Journal, that's led some national chains to consider using a suggested tip instead of the automatic gratuities.
At Lemongrass Thai Bistro in downtown Macon, managers there have a mandatory tip of 20% on parties of 6 or more.
They say they already require servers to report income, because they pool tips and divide them among staff. But manager Drew Kitchens says he still wants to learn more about the policy.
"It's definitely something that I think every restaurant should be deeply looking into," says Kitchens.
A few doors down at Molly's Cafe, owner Betty Mock says her restaurants doesn't use mandatory tipping for large parties. Customers are free to tip entirely based on service.
"I feel like a service tip should be earned and not given," says Mock. She says her employees are taxed up to minimum wage and are free to keep anything above that.
She says not having the automatic tips is a better systems because her servers have an incentive to work for a good tip and keep more of their money.
The IRS made the change last year after seeing a larger number of restaurants using the automatic tip system.
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