Changes in tipping thanks to the IRS

Published On: Sep 12 2013 11:00:00 PM EDT   Updated On: Sep 13 2013 12:06:15 AM EDT

A new IRS rule means many restaurants will stop adding a gratuity right to the bill. Starting next year the IRS will begin classifying those automatic tips as service charge which equals higher taxes for restaurants owners.


A new IRS rule means many restaurants will stop adding a gratuity right to the bill.

That’s because the rule makes these automatic tips a service charges and that equals higher taxes for the restaurant owners.

This could mean big changes in a town where the service industry employs almost a quarter million people

Most servers like automatic gratuities, like the 18 percent imposed on large parties, because they make a lot more money than if its left up to you to decide.

The amount of money servers make may surprise you. In Florida the minimum wage is $7.79 but servers can be paid $4.65 and rely on tips to make up the difference.

Professor Michael "Doc" Terry of Rosen College of Hospitality Management says the rule of thumb is 15 percent and if you're really happy-- 20 percent.  

"They're called tipped employees for a reason and the structure of their pay is based on that," he says.

K restaurant owner & Chef Kevin Fonzo would like to see automatic tips remain an option. 

"We'll keep it in place if the guest want that, I think it's totally up to the guest," Fonzo said. "If they want that on the bill ahead of time I say go for it."

But what you may find on the bill are suggested tip amounts-- if math is just too much for you after a big meal.

Those suggested tips amounts would be 15, 18 and 20 percent. 

If your wondering what is the appropriate amount for tipping your hair dresser to the taxi cab drive, click here for more information.


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