Restaurants, waiters and the IRS, what do they have in common?
In 2014, the Internal Revenue Service (IRS) will require restaurants to recognize automatic gratuities as taxable wages and not as tips. This most recent move by the IRS is a strategic move to try to collect income that is not normally reported by waitresses or restaurants. However, the IRS by doing this could be creating a lot more harm than good.
Because automatic gratuities are normally added to large parties only, this is going to create a lot of headaches, hardship and grief to waiters that they just don't deserve. For these reasons, "Darden Restaurants, owner of Olive Garden, LongHorn Steakhouse and Red Lobster, is experimenting with eliminating an automatic 18% gratuity at more than 2,100 restaurants." the Wall Street Journal reports.
Due to the new IRS ruling, I expect most, if not all restaurants to eliminate automatic gratuities as that is what the waiters will want them to do.