Marianna Dyson Quoted in The Wall Street Journal Regarding IRS Recharacterization of Automatic Gratuities at Restaurants as Service Charges

"IRS Rule Leads Restaurants to Rethink Automatic Tips"
The Wall Street Journal
09.05.13Marianna Dyson is quoted regarding the IRS's new enforcement initiative to treat automatic gratuities as service charges. The upcoming January change will recharacterize auto-gratuities as regular wages, subject to payroll tax withholding at the time of payment, instead of as tips, which are left to employees to report as earned income. The change will not only pose a potential financial hit for servers but will also financially impact restaurants. As Dyson notes, restaurants that are currently eligible to receive an income tax credit on some or all of the employer's Medicare and Social Security payments when the amounts are reported as tips will no longer be eligible to do so if these amounts are recharacterized as service charges. The ruling's gray area of whether a suggested gratuity constitutes a voluntary tip from a guest versus a service charge can continue to come under scrutiny from the IRS. "How far can you go before the IRS says that looks like a service charge?" Dyson said.
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