IRS changes could affect your restaurant tab in 2014 - Action News 5 - Memphis, Tennessee

IRS changes could affect your restaurant tab in 2014

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(WMC-TV) – We've all seen the auto-gratuity policies on restaurant menus that require large groups to tip.

That may be a thing of the past after the IRS changed the way the money is taxed, and some of the servers may not like it.

For three years Olivia Craig has been waiting tables in Southaven.

"I love it," she said. "You get to interact with people. You get to have a lot of fun."

Each night, Craig and other servers work hard for tips at the Fillin Station Grille.

"We make $2.13 an hour," Craig explained. "A lot of people don't realize that. I guess that's the problem. If people don't tip, they think we make minimum wage. We don't."

Starting this year, the Internal Revenue Service is making some changes that could affect the money waitresses like Craig bring home each night. It's all centered on auto-gratuity.

"Restaurants use auto-gratuity for large parties where servers work really hard, and then some people wouldn't tip all the way for that, and larger checks add up faster," manager Dennis Cheshier said.

In 2014, restaurants will be required to report auto-gratuities as a 'service charge' since customers are required to pay it. It now becomes a taxable wage for servers and could cause some to have to wait for a paycheck to see that automatic tip instead of walking out with the money each night.

"It's going to be an extra expense on the business but on the employee as well," Cheshier said.

Cheshier said his restaurant rarely adds an automatic tip but knows it will impact others in his industry. Some chains are doing away with added gratuities completely. Cheshier will wait and see.

The IRS ruling was issued in 2012, but restaurants had all of 2013 to prepare for the changes. Many of the local restaurants we tried to call in Memphis were closed for New Year's.

We'll continue to follow up to see where you could see changes this year.

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