IRS Rule Change Prevents Collection of Automatic Gratuties

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.

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