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No more ‘automatic tips’ for large groups at restaurants?

Many restaurants and other businesses automatically add a tip to the bill for groups over a certain size. But that’s likely to change in 2014, thanks to a new decision from the IRS.

As of January 1, 2014, these automatic tips must be treated as “wages,” subject to payroll tax withholding. This will mean much more paperwork for the businesses (not to mention making the waiters and other servers unhappy).

Darden Restaurants, which owns the Olive Garden, Red Lobster and Longhorn Steakhouse chains, has announced that it is experimenting with getting rid of automatic tips. Many other service businesses are expected to follow suit.

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