Did You Know….?

Change in Reporting Tips is On The Horizon

Did you know the change in how you report tips is  on the horizon?  Starting in January 2014 any automatic tip added to a large party’s (tables of 8 or more) bill will be considered as service income and treated as wages to your employees.  This change means lower take home pay for waitstaff and larger social security payments for restaurants. To avoid tips being reclassified as income a tip must;

Be at the discretion of the customer

The amount must be determined by the customer

The beneficiary of the tip is generally to be determined by the customer

The amount is not subject to negotiation or policy


The automatic tip should not be reported by a server as tip income when reported to employers.  It should be included in his wages.


A number of larger restaurants are temporarily doing away with automatically charging a tip amount on the bill.

This is a test to see if customers continue to add a reasonable tip amount when the dining party is large.  A decision will be made whether or not to continue to add this automatic tip charge or allow customers to determine what they feel is an appropriate tip.