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National Restaurant Association - IRS webinar delves into tips vs. service charges

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IRS webinar delves into tips vs. service charges

The IRS will hold a webinar on Feb. 11 that will address some of the common points of confusion restaurant operators face about the tax treatment of tips vs. service charges, the automatic gratuities some restaurants add to checks.

Over the past few years, the IRS has placed a greater emphasis on drawing a clear line between tips and service charges. While the IRS does provide criteria for classifying payments as tips, confusion about the distinction remains. The lines between the two can blur, particularly when restaurants offer pre-selected tip percentages or suggested tip amounts. 

Topics the webinar will cover include:

  • Defining tips vs. service charges
  • Employee and employer responsibilities regarding tips
  • Revenue Ruling 2012-18, which reaffirmed the four factors the IRS uses to determine whether a payment can be classified as a tip.
  • IRS Form 8027 – Employer’s Annual Information Return of Tip Income & Allocated Tips
  • Additional Medicare tax on tips

The webinar will begin at 2 p.m. EST.

Register for the IRS webinar, “Tips vs. Service Charges: What are they and how are they reported?”

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