Are you aware of the new laws regarding tip reporting?
Effective January 1st. 2014, the Revenue ruling 2012-18 is dramatically effecting service charges or automatically applied tips! And from the people I spoke with, the IRS is going to be getting VERY serious about enforcing these new tipping policies!
An automatic gratuity is when you add something like 18% for parties of 8 or more. It doesn’t make it illegal, it just can’t be cashed out to take advantage of the FICA Tip Credit (The 45b Credit). It’s now considered a service charge, not a tip and it needs to be reported as wages. Meaning you need to pay Social Security, Medicare and Unemployment Tax on it!
This is somewhat easy to fix, you can just eliminate your automatic tip policy on large groups!
The bigger problem is when tips are collected through banquet and catering events.
It get’s even a little more confusing because these service charges, that now are considered wages, can effect overtime calculations. WOW!!!
IMPORTANT: These are just suggestions from my research, I am not offering you legal advice and I am not licensed or trained in tax laws. You definitely need to run this advice by your accountant or lawyer!
What is the solution? Here are a few options, but you and your staff are not going to like any of them!
If you have already set up some new systems, to deal with this in your restaurant, please share them in the comment box below!
Click Get it Now to Instantly download my Foundation for a Lifetime of Restaurant Success 7 video Training Course and stay up to date with changes that will effect your restaurant and how to best deal with them, as well as tips, tricks and proven strategies to help you lower you costs and make more money!
Your Next Step
I hope this was helpful! I hope you loved it! If you did, will you go ahead and smash the little blue like button just below video. Will you also share this with your other restaurant friends? Tell them how awesome this video was so I can keep providing this great content for you at no charge. That’s the only way I am able to keep doing this. Please also leave a comment or ask me a question below this video. I promise to respond to you personally within 24 hours. If you are not already on my email list and would like to get great content delivered to your email box weekly, then please sign up for my email list! Have a wonderful Day!
QUESTIONS & COMMENTS:
Please leave your comments or questions below, I promise to respond to every one personally!