Change in IRS rules has waiters worried


South Florida News Service

Ben Coley, a former server at BRIO Tuscan Grille in Hallandale Beach, walked out of his job in the middle of his shift twice in the beginning of the year, before he quit. Both times, he was serving large parties, each with more than 20 guests celebrating special occasions. Neither group left him or other servers working with him a tip.

“How am I supposed to feed my son? I feel like they are taking food right out of his mouth,” said Coley, who worked at BRIO for about two years.

Because of a new Internal Revenue Service regulation, a growing number of restaurants are dropping mandatory service charges for large parties and automatic gratuities at tourist-heavy locations — meaning that servers and other employees risk getting stiffed.

The change is especially apparent to servers in South Florida, where foreign visitors are often unaccustomed to leaving tips and do not realize that because U.S. law allows waiters to be paid less than minimum wage, they rely on gratuities to make a living.

Servers at restaurants along South Beach's Lincoln Road and Fort Lauderdale's Las Olas Boulevard, where international patrons are common, say they are finding less cash in their pockets at the end of shifts as a result of the new rule.

Many other countries don’t customarily tip servers, who are paid higher base wages, relatively speaking, than in the U.S. Some foreign visitors are puzzled or even annoyed by the request for a tip at the end of dinner, thinking the price on the menu should have covered service as it does in their own countries.

This new IRS regulation, which took effect Jan. 1, differentiates between “tips” and “service charges,” requiring restaurants to treat automatic gratuities as taxable service charges subject to payroll tax withholding, just as with regular wages. Subsequently, the automatic gratuity usually tacked onto bills, particularly those of large parties, might become a thing of the past. As a result, servers are earning less, and businesses are forking out more for accounting.

Of course, servers and all employees who receive tips are required to report all that money to the IRS as part of their income. At some establishments, money that guests leave for servers are trackable when they pay by credit or debt cards, but not when they leave a cash tip.

Joseph Henchman, an attorney and policy analyst at the Tax Foundation in Washington, D.C., said the IRS decided to draw a sharper distinction between voluntary tips and mandatory services charges as part of a larger crackdown on unreported wages.

Because of this new IRS regulation, some restaurants have opted to eliminate automatic gratuity altogether, leaving it up to guests’ discretion. That poses a risk for restaurant employees, since not everybody tips according to U.S. restaurant industry standards of 15 to 20 percent.

Ruzaliya Garipova, 29, a server at P.F. Chang's China Bistro at Sawgrass Mills, encounters many foreign tourists. For her, the reliability of the automatic gratuity is big loss.

“A lot of foreign tourists are unfamiliar with American tipping customs. They tip way under 18 percent,” she said. Adding to the stress is the restaurant’s policy of tip-sharing among employees, so that bartenders, server assistants and food runners get a percentage of the proceeds.

“If we aren’t going to get tipped properly, then we deserve a raise,” Garipova said.

Tipped employees in Florida are paid a minimum wage of $4.91 an hour with the expectation that the tips they earn will raise their overall hourly wage. The minimum wage for non-tipped workers is $7.93.

To remind diners of the importance of tipping, Orlando-based Darden Restaurants — which owns Olive Garden, Red Lobster and other brands — has added a table calculating tips of 15, 18 or 20 percent to the bottom of each bill as it has ceased levying automatic tips.

Still, sometimes workers get stiffed.

“Two parties of 10 walked in really late one night, around an hour before we normally close, keeping all the staff way after we closed, and both parties left zero tip,” said Steven Preston, a chef at Grille 401 on Las Olas Boulevard in Fort Lauderdale. “It’s OK for us [chefs] because we make a decent hourly wage, but for servers who make $4.91 an hour, it sucks.”

While many servers are uneasy about the new policy, some managers believe employees just need to shift their attitude.

“People don't have to tip if they don't want to,” said Jessica Weko, 30, general manager at BRIO Tuscan Grille in Tampa. “Anyone working in this industry needs to know that going into it, or they are going to be disappointed every day of their life.”

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