Automatic tipping: IRS rules change could be taxing for hospitality industry | Indianap... - 0 views
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It could affect hiring if restaurants continue to be faced with additional costs and burdens to comply with government mandates and regulations,”
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thanks to an IRS ruling, restaurants are being thrown into the debate — and are faced with a decision of their own: Should tipping for large parties be left solely to the customer or should the restaurant tack it on to the bill?
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“When they spend $200 and leave $20, you’re losing out on about $16 or $17 when we already pay a tip out to a host, bartender and bussers. It really makes the income of a server go down.”
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According to this article, the IRS is considering changing the way Automatic gratuities are processed in restaurants. Often when gratuity is included, more than one issue arises. Parties tend to not leave additional tips and there is also an issue with what if a customer wants to leave less than the automatic 15 or 18 percent tip? Bennet Ackerman, owner of a Melting Pot in Indianapolis, says that "some servers tend to get a little lazy when they know they already have that automatic gratuity." If a large party is given a check of $200, some parties will tip $20. If gratuity was included, they would receive anywhere from 30-40. After tip out to the bartender, hosts and other support staff, the server is actually making about a 6% tip off of that table. I agree that with large parties, the reward sometimes does not pay off, no pun intended. More money can be made off of smaller parties, and the turn over rate is faster. Some restaurants are doing away with automatic gratuity, and instead, they are adding suggested tip amounts at the bottom of the check. This, will at the very least, give the guests dining, a reference guide. The issue at hand here is whether or not to consider the automatic gratuity as a tip for a server, or as a service charge. This will greatly affect taxes at the end of the year and budgeting for the employees. With the economy the way it is, servers and other tipped workers are seeing less tips. The issue is of great concern for restaurants and come January 1st, there may be some very unhappy employees as well as restaurant owners.