New IRS guidelines could end automatic dining gratuity

Posted at 7:12 PM, Dec 31, 2013
and last updated 2014-01-02 07:37:35-05

RICHMOND, VA (WTVR) - The IRS has issued new guidelines that take effect starting January 1, 2014 that could end the "automatic tip" at many restaurants.

The reason? If a restaurant wants a tip to be added automatically, such as in the event of a large party, that tip must be classified a taxable wage.

Under that scenario, a server would not be able to "cash out" that tip the night of, but rather would need to wait until his or her paycheck to get the money.

Of course paychecks always take out taxes. While servers are supposed to, some never declare the tips they get after each shift.

According to the Wall Street Journal, the Olive Garden Restaurant Group is considering eliminating the "automatic tip."

The Texas Roadhouse has already said that automatic tips will be gone starting in 2014.

While many customers at area restaurants are pleased, some servers are not.

Rachelle Carter, a long time area server, said if restaurants get rid of the "automatic tip" it could dissuade servers from wanting to take on large party groups - where tipping can be weak.

Currently servers are paid $2.13 an hour with tipping anticipated, bringing their salary well above minimum wage in many cases.

"It is kinda like a smack in the face for somebody who has worked really hard to keep this party happy and then they get slapped $5," Carter said.