Servers React To The New IRS Tipping Laws
The start of 2014 brought in all sorts of new food laws, including chefs and bartenders having to wear gloves. However, one of the laws that caused the biggest stir was that servers were no longer allowed to take home automatic gratuities on large parties at the end of a shift.
Under the new law, the IRS classifies automatic gratuities as service charges that are taxable as regular wages and subject to payroll tax withholding. That might sound like a bunch of arcane tax law mumbo jumbo, but what it means is that restaurants have to treat those tips like regular wages, and they are now factored into the servers' paychecks.
Basically, those automatic 18% gratuity charges on tables of 6 or more may well be a thing of the past. Customers might rejoice in this fact, but it ends up being a bum deal in some servers' opinions.
Trevor Smith, who works as a server at Kitchen 24, believes that everyone from the customer to the restaurant to the IRS themselves loses with the new law.
"The fact of the matter is this most likely wasn't researched properly before going into effect. They obviously didn't take into account the fact that most restaurants would do away with the added gratuity altogether and therefore the IRS still loses out on that money," says Smith. "I have no problem paying taxes on what I make. Of course I would like to make as much as I can, though. But now everyone loses out. The IRS loses the money, the server loses the money and eventually the restaurants will lose good servers too."
One server from a Silver Lake restaurant told KCET:
This is a much bigger problem than it seems for restaurant workers, as people aren't exactly on their mathematical game after inhaling a couple of bottles of wine. "People underestimate what they've consumed and throw too little into the pile," says Janine. "Inevitably one person has to be sober enough and take charge of the bill, and consider the server as well as the friends." This was the problem that automatic gratuity was supposed to solve. It was meant to protect the worker from spending a few hours running around for a large party, only to be stuck with a dollar tip at the end of the night. Now, with the new law, restaurants are simply voiding the concept. But is that going to make that big of a difference?