A tip that’s required is no longer considered a tip under new I-R-S rules — and that has caused a change for restaurants. Restaurants have had policies for years where they add an automatic “gratuity” or tip when they serve large groups. Iowa Restaurant Association President, Jessica Dunker, says the I-R-S changes things at the start of the new year. “You can have an automatic gratuity — but then that has to be treated as a service charge,” Dunker explains.

The I-R-S now treats a service change as worker wages from the employer. “And that means as an example, if you have worked more than 40-hours this week, what’s included in your wage is part of that service charge,” Dunker says. “So that the calculations for an employer become very difficult. In addition to that, a service charge. an employer has no obligation to give to the employee.”

While restaurants used to include an automatic gratuity of 20-percent or more for large parities, most now list a suggested but not mandatory tip for larger groups.

(Radio Iowa)