GRBJ: Automatic 18% tip to disappear

8:59 AM, Nov 18, 2013   |    comments
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GRAND RAPIDS BUSINESS JOURNAL - Restaurant patrons who have been irritated by the 18 percent tip some places slap on a group check will have something to celebrate besides the new year on Jan. 1.

A new IRS revenue ruling, which was first announced in 2012 and then put on hold, will take effect Jan. 1, and it spells the end of what restaurateurs call the "automatic gratuity."

CPA Claude Titche III, a tax partner at Beene Garter in Grand Rapids, said the IRS has determined if the customer "does not have a choice but is told they have to make a specific payment, then that is called a 'service charge,' and a service charge under this new revenue ruling is deemed to be compensation to the wait staff, instead of a tip. And if it's compensation, it is supposed to be included in their W2 and have all the various withholdings taken."

Click here to read more from the Grand Rapids Business Journal

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