Required Tips May Disappear in 2014

A recent IRS rule change may cause some restaurants to drop required tips from the bottom of their bills.

Deceiving Tipping Practices

There is a sushi restaurant I occasionally go to has a very annoying feature. After eating, they bring the bill. It looks just like every other bill I’ve gotten with one exception. They itemize every item, they have a line for a tax, and they give an option to leave a tip.

However, they also have a line item for the tip, which is a required 18%. I think this is extremely annoying because I don’t get to take into account how the service is.

But what’s worse is the deception. Even after calculating the 18% tip and adding it to the total, they have another blank line allowing you to add another tip of your choosing. If you’re not aware of the required tip (which is not obvious at all), you may end up unintentionally leaving a 30% tip.

Why Required Tips May Go Away

Thankfully, this practice may be disappearing in many cases. The IRS will begin classifying automatic gratuities as service charges, which affects both the employees and the restaurants for tax purposes. Service charges are subject to payroll tax withholding, while tips are left up to the employees to report as income.

In the past, it was up to the employee to report the income to the IRS, and as you can imagine, a lot of waiters and waitresses would just pocket at least part of their tips and not report them. More service charges also means additional paper work (having to calculate those tips into the hourly wages paid would be difficult), so restaurants may simply remove the required tips and let the employees worry about the taxes.

Suggested Tip Amounts Are OK

What we may see is suggested tips at the bottom of checks. So the bill will include what a 15%, 18% and 20% tip would come out to. It eliminates the need to do the calculation yourself and saves time. I like having it there and I’m sure that many servers do as well because it anchors people into thinking that one of those numbers is the right amount to give, but are likely higher than the average tip left by customers.

How do you feel about required tips? Are you a fan of recommended tip amounts?

9 Responses to Required Tips May Disappear in 2014

  1. Mark Ross says:

    I think tips shouldn’t be required. It’s the discretion of the customer if he wants to give one and shouldn’t be forced by anyone.

    • Yah, one weird thing I saw was that a company said that even though they included it, customers could change the price. I would never assume that, can I cross out the price of an item right above it, too?

  2. I wrote about tipping percentages on my blog today, but I agree that this tipping practice will likely go away with the new IRS rules. I don’t mind them calculating how much 15% 18% and 20% are on the bill as long as they let me tip whatever I want.

  3. I have seen this before and prefer not to go to restaurants with tips added into the bill. Not because I don’t want to tip that much, I usually tip 20-30% or more, only because I do not think it is a requirement for a tip. I know servers live on this, but they need to provide the service before they get paid.

    • I completely agree and most people don’t notice it. So while it is annoying for me, it ends up being costly for other people. I’ve seen other people double tip without realizing it until afterwards a few times and that sucks.

  4. J Ascher says:

    We should do away with tipping altogether and provide adequate wages for food service personnel. It would reduce turnover in restaurants and increase professionalism in this line of work.

  5. R says:

    Has anybody ever had to work for tips making these comments ? Try having people throw food at you, refuse to pay, then you have to pay for their meal and oh the wonderful dirty men who have to treat you like a stripper in front of their wife…nice right? So try it for a day, see how much you think you should be tipped.

  6. moneystepper says:

    I’ve never liked required tips and think the practice in the US is a little bizarre.

    In the UK, they sometime add a “suggested tip” onto the bill for large groups (8 or over), but this can be removed upon request. Otherwise, its the customer’s choice and a tip is “earned” for good service.

    In France (specifically here in Marseille), they include the tip into the price of the food and higher wages for the staff. Therefore, tips are saved for truly exceptional service. The one problem with this is that is seems that waiters aren’t expecting tips and hence customer satisfaction seems to fall to the bottom of the list!

  7. David says:

    I went to the barber yesterday and the machine wouldn’t even let me bypass the tip portion once they rang my total up. It happened to be that I didnt want to give the lady who cut my hair a tip because she didn’t do a good job but I was forced to give her an extra dollar…

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