“Tip” or “service charge” rule

Posted on Nov 19, 2013

Restaurant owners and employees will be affected by an IRS rule going into effect this coming January. The “automatic gratuity” that many restaurants add to the bill for larger parties will be treated as a “service charge” rather than as a “tip.” Service charges are treated as regular wages subject to withholding by the employer. Tips, on the other hand, are reported as income by the restaurant employees receiving them. The ruling is likely to complicate bookkeeping and reporting for both restaurant employees and employers.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ <https://plus.google.com/108764776146415485651/posts> , LinkedIn <http://www.linkedin.com/in/gillilandcpa> , Facebook <https://www.facebook.com/gillilandcpa> , and Twitter <https://twitter.com/dnggcpa>

Share