Debate Magazine

New IRS Rule Could Cut into Restaurant Workers’ Tips

By Eowyn @DrEowyn


Fox News: Even as President Obama and progressive activists are trying to sell the nation on hiking the national minimum wage to help restaurant workers and other low-wage employees, the Internal Revenue Service is seemingly determined to make life harder for those same workers.

A change in tax policy implemented Jan. 1 will prevent restaurant workers from collecting automatic gratuities — the added 18 percent fee many restaurants charge to groups of eight or more — as part of their tips. Instead, that added fee will be included in their payroll, meaning workers have to wait up to two weeks to get that extra cash and must pay additional taxes on it.

It means less money in servers’ pockets and more for the federal government.

“We had a lot of nervous servers when they first heard about it,” said Pat Forciea, marketing director for Hell’s Kitchen, an independent restaurant in Minneapolis. “They would have had to go without that extra money in their pocket until it went through the payroll process and showed up in their checks two weeks later.”

Forciea said his restaurant does quite a bit of banquet business for nearby businesses, and used to tack-on an automatic gratuity for those big groups.

He admitted to being confused by the rule change when it was first announced in June 2012, but after consulting with an attorney he was told there was an easy way around it.

Now, Hell’s Kitchen is using a “suggested gratuity” of 18 percent on big groups, but the amount isn’t added directly to the check.

Under the new IRS rules, that’s enough for it to still be considered a tip. But it means the workers don’t have the assurance of a good tip when taking care of a big group.

Way to stick it to the service industry employees Obama!


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