IRS says mandatory Tip is now a Service Charge

"Gary's answer that as it was given to them in a check so it obviously is taxed."

I remember receiving it in cash, but this was years back. Although, the totals were included on end of year tax forms.

Just a little clarification...

90% of patrons pay by credit card. All credit card tips are paid to the server by bi-weekly checks. They are not paid in cash nightly by the restaurant. Therefore servers couldn't tip out the support staff directly each night. The only exception is if a guest pays their bill in cash. If the bill if enough to cover the server's charged tips for the night, then the server actually does walk with their money that particular night. The support staff still gets paid by check.

But this is going a little off topic. I'm just a little upset that corporate greed is further eating into my money. If you're only going to pay me $2.13 an hour and require me to assist in paying the wages of your support staff, I think I deserve a little protection on the back end through a guaranteed auto-grat. Call it an auto-grat, a service charge or whatever... doing away with it at the expense of your employees because you want to save a few dollars tax wise is just not right.

But this is going a little off topic. I'm just a little upset that corporate greed is further eating into my money. If you're only going to pay me $2.13 an hour and require me to assist in paying the wages of your support staff, I think I deserve a little protection on the back end through a guaranteed auto-grat. Call it an auto-grat, a service charge or whatever... doing away with it at the expense of your employees because you want to save a few dollars tax wise is just not right.

I really don't think any of us here disagree with your sentiment on this subject and many of us would like to see server instead of wages raised. Unfortunately, we are not in the majority and I doubt it will happen anytime in the near future. If the money ends up going in service checks anyway it gets taxed I'm not quite sure what the reason the restaurants are getting rid of the service charge is? Does the restaurant itself somehow get taxed in addition to the servers if it's called a service charge?

I know I'm not an accountant but even if the restaurant had to show with his income, it would be offset by the same amount if they distributed it to the servers and back staff so it shouldn't affect their bottom line for taxes.

My understanding is that by declaring the gratuity a "service charge", the restaurant is now taxed instead of the servers. It can be the only explanation for its elimination. Parties of that size with checks that large are almost 100% paid by credit card so the gratuities were being 100% recorded as income anyway. So I don't know if it's the IRS or the industry itself that hasn't quite thought this through.