IRS Rule Changes Tax Treatment of Automatic Tips

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IRS Rule Changes Tax Treatment of Automatic Tips

Category : Employment Law

Beginning on January 1, 2014, an Internal Revenue Service rule changes the tax treatment of automatic tips. The IRS rule will classify those automatic tips as service charges. That means, those automatic tips on large parties will be treated as regular wages subject to payroll tax withholding rather than as tips. Please make the necessary payroll adjustments for all automatic gratuities.