IRS Gets One Right. Ends Tips For Large Parties

Beginning January 1st those mandatory tips for parties of 6 or 8 or whatever will be going away.

IRS says that is a service charge and the restaurant MUST take out taxes beginning then.

http://online.wsj.com/article/SB1000142 ... s_business

Someone must have worked their way through college as a waitperson.

This may sound like a good thing upfront but I'm not sure it really is. All it's going to do is mandate that the restaurant take taxes out of the money they call a service charge before distributing the money to the servers. While this will ensure that taxes are paid on the money I think in the long run it's going to hurt the servers. Servers have a tough enough time in many places already, they don't need something else to hurt them. As a matter of fact here's an article from business 1st this week: http://www.bizjournals.com/louisville/news/2013/09/05/new-gratuity-tax-law-has-one.html in which Chef Anthony Lamas expresses the same concerns.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

Most places I've ever seen tax servers' tips based on their sales as opposed to claimed tips anyway, so I'm not sure I see what the big deal is.

This line in the story:

"Restaurants are required to report to the IRS what its employees report receiving for tips and to pay Medicare and Social Security taxes on those amounts. Restaurants are eligible for an income-tax credit for some or all of those payments, but service charges aren't eligible, according to Marianna Dyson, a payroll tax attorney in Washington, D.C., who represents restaurant chains."

implies to me that restaurant owners would get a tax credit by phasing out automatic gratuities. They'll get the credit and the IRS will collect taxes on assumed tips whether or not the server actually collected those tips.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

I don't totally disagree with you. But, instead of a service charge I would just as leave that they raised their price by 18% and did not allow any tipping at all. Then paid their staff a good wage. Got rid of those who won't cut it. And, paid the really good servers more. Sort of a meritocracy.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

I don't totally disagree with you. But, instead of a service charge I would just as leave that they raised their price by 18% and did not allow any tipping at all. Then paid their staff a good wage. Got rid of those who won't cut it. And, paid the really good servers more. Sort of a meritocracy.

As already pointed out by Chef Lamas, the opposite would probably happen. The good servers will fine greener pastures while only the dregs would remain and be content with lower wages.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

I don't totally disagree with you. But, instead of a service charge I would just as leave that they raised their price by 18% and did not allow any tipping at all. Then paid their staff a good wage. Got rid of those who won't cut it. And, paid the really good servers more. Sort of a meritocracy.

Agreed.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

I don't totally disagree with you. But, instead of a service charge I would just as leave that they raised their price by 18% and did not allow any tipping at all. Then paid their staff a good wage. Got rid of those who won't cut it. And, paid the really good servers more. Sort of a meritocracy.

As already pointed out by Chef Lamas, the opposite would probably happen. The good servers will fine greener pastures while only the dregs would remain and be content with lower wages.

That guy in San Diego who ran the service charge only restaurant (vague enough?) disagrees. He said only one server left due to the change from tips to service charge.

I would prefer every restaurant switch TO service charges instead of tips. And actually pay servers a real wage.

But that is just me (actually, it isnt just me).

I don't totally disagree with you. But, instead of a service charge I would just as leave that they raised their price by 18% and did not allow any tipping at all. Then paid their staff a good wage. Got rid of those who won't cut it. And, paid the really good servers more. Sort of a meritocracy.

I also agree. But its really the same thing. Those that do the service charge only still split that money among staff, so its sort of a commission on sales. And it can be waived if service is poor. One of the big advantages is, apparently, not having to worry about servers tipping out to back of house or bussers or whatever, as it is a service charge, management can determine the split.