Automatic 18 Percent Tips for Large Parties on the Way Out

What's Hot

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

Do This or Your iPhone Bill May SkyrocketSave

11 Places in the World Where You Can Afford to Retire in StyleMore

19 Moves That Will Help You Retire Early and in StyleFamily

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

50 Ways to Make a Fast $50 (or Lots More)Grow

32 of the Highest-Paid American SpeakersMake

The 35 Two-Year Colleges That Produce the Highest EarnersCollege

5 DIY Ways to Make Your Car Smell GreatCars

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

7 Household Hacks That Save You CashAround The House

5 Reasons a Roth IRA Should Be Part of Your Retirement PlanGrow

30 Awesome Things to Do in RetirementCollege

Beware These 10 Retail Sales Tricks That Get You to Spend MoreMore

9 Tips to Ensure You’ll Have Enough to RetireFamily

The IRS is changing the rules on forced tips for big groups, and restaurants might ditch them to avoid tax complications.

Gratuitous gratuities are going, if not gone.

You’ve seen it on the menus before — a required tip (usually between 15 percent and 20 percent) for a large group, usually defined as at least six or eight people. Well, starting next year, you’ll probably see less of this fee.

That’s because the IRS won’t recognize them as tips anymore, Consumerist says. Instead they’ll be seen as “service charges” or wages. The IRS reasons (as do many customers) that it’s not a tip if it’s mandatory.

This is a big deal for restaurants. Servers pay taxes on the tips (at least some of them), while the employers pay taxes on wages, Consumerist says. If restaurants keep the automatic “tip,” that will mean lots of extra math and attention on the part of restaurant managers after Jan. 1, when the change takes effect, and less cash immediately in the hands of waitstaff.

On top of the hassle, restaurants will lose some of the tax credit they get for paying Medicare and Social Security taxes on reported tip income, The Wall Street Journal says. Service charges aren’t eligible.

Darden Restaurants, the owner of brands including Olive Garden and LongHorn Steakhouse, is already testing out a system without those automatic gratuities in 100 restaurants, the WSJ says. Generally, it has charged 18 percent for groups of eight. It will decide whether to make the change everywhere and permanently by the end of the year.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 9 Tips to Ensure You’ll Have Enough to Retire

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,651 more deals!