IRS Changes the Rule on 18% Mandatory Gratuities

The IRS has recently announced that the 18% mandatory gratuity policy for large party dining will no longer be categorized as a tip.  Since a “tip” is supposed to be something the customer leaves at their discretion, the compulsory 18% policies utilized by many restaurants today change the character of the money to a wage—not a tip.

This IRS first came up with the rule in 2012, and it was to take effect on January 1, 2013.  However, the IRS delayed the rule’s effect until January 2014 in order to allow restaurants to catch-up and amend their policies.

What does this all mean?  More freedom for patrons, although, some would argue that adding the 18% automatically made it a bit more convenient for those times you’re splitting a bill 9 ways.  For servers, it depends on whether or not the restaurant continues to utilize the policy or changes its ways altogether.  Some restaurants have found success with simply listing the tip amounts for 15%, 18%, and 20% intervals ensuring a decent gratuity left for their wait staff.