Greenville Restaurant, Servers Weigh In On New IRS Tipping Rule

If you've gone out to eat with a big group of people at a restaurant -- you may have expected to see a gratuity automatically added to your bill.

You won't find many places doing that anymore after IRS rules went into effect January 1st that now make the practice a "service charge".

If restaurants choose to add the service charge, that tip money that used to go straight to the server, must now go to the restaurant, and the restaurant must be taxed on it.

Wasabi 88 waiter David Hill says, "We don't like it -- but at the same time -- where are we going to go and get a job that's as flexible with our school schedule and to make the amount of money we make."

Dai Nguyen -- owner of the restaurant -- says that the mandatory gratuity was there as a safety net to protect his employees. He says, "A lot of people don't understand servers make $2.13 an hour and now you're taxing them on top of what they're possibly making. One example was that we had a party a while back -- the employee took the party and couldn't take anymore parties and they left her $3.00 for the whole party. She had to pay to work that table and didn't make anything off of it."

Nguyen says that they won't be putting automatic gratuity on bills of big parties anymore. He says it's just too much tax and accounting work for his small-business. He says, "It just feels like it's putting a lot more pressure on the small businesses -- it affects more of our bottom line -- and I don't think the IRS understands the more pressure you put on small business or any business -- if we go out of business -- that's revenue that could have been going to the IRS in the first place."

You may have noticed restaurants showing you a recommended tip percentage when you receive your bill. That practice is still legal.