Friday, March 29, 2024 Mar 29, 2024
58° F Dallas, TX
Advertisement
Restaurant News

Restaurant 101: IRS to Start Enforcing Automatic Gratuity as Restaurant Income

The IRS will begin enforcing law that considers mandatory gratuity as income.
By Nancy Nichols |
Image


If you are a restaurateur or a server, you need to pay attention. After you watch the protesting-doing-math-at the-table clip from Curb Your Enthusiasm video,  you need to do some math homework. Starting January 1, 2014, the IRS is going to start enforcing a law that has been in place for a while. Like most laws, it sounds sexy: Tax Treatment of Mandatory Gratuities.

Here’s the short version: If you automatically add a gratuity of 18 percent or higher on parties of six or more, the money collected will be treated as a service charge which, in turn, is considered restaurant income. And if said charge is distributed to service staff, it is considered wages, not tips.

A service charge is an amount automatically added to a customer’s bill by management. The IRS lists four factors, all of which must be present in order for the customer’s extra payment to be deemed a tip and not a service charge:

1.    The customer’s payment must be made free from compulsion;
2.    The customer must have the unrestricted right to determine the amount;
3.    The payment should not be the subject of negotiation or dictated by the employer policy;
4.    And, generally, the customer has the right to determine who receives the payment.

Read the law and discuss. Don’t get blindsided.

Related Articles

Image
Arts & Entertainment

Here’s Who Is Coming to Dallas This Weekend: March 28-31

It's going to be a gorgeous weekend. Pencil in some live music in between those egg hunts and brunches.
Image
Arts & Entertainment

Arlington Museum of Art Debuts Two Must-See Nature-Inspired Additions

The chill of the Arctic Circle and a futuristic digital archive mark the grand opening of the Arlington Museum of Art’s new location.
By Brett Grega
Image
Arts & Entertainment

An Award-Winning SXSW Short Gave a Dallas Filmmaker an Outlet for Her Grief

Sara Nimeh balances humor and poignancy in a coming-of-age drama inspired by her childhood memories.
By Todd Jorgenson
Advertisement