Beltway Confidential

IRS wants more tax money from restaurant servers

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Beltway Confidential,Joel Gehrke,Taxes,IRS

President Obama's policies are doing a number on income for restaurant workers. First, Obamacare's employer mandates led major restaurant chains to cut server hours. Now, the Internal Revenue Service has proposed a new rule to collect more tax money from servers.

The IRS, beginning in 2014, will require restaurants to withhold the automatic gratuity added to large checks, rather than allow servers to take the tip money home with them each night.

"This new IRS rule is one more mandate to comply with and one more way to make sure the IRS extracts every possible penny out of hard-working waiters and small business people — the very folks who are suffering most in this weak economy," Daniel Garza, executive director of the LIBRE Initiative (a right-of-center Hispanic group) said in a statement on the rule.

The new rule could lead restaurants to stop mandating the tips for large groups.

"Darden Restaurants Inc., owner of Olive Garden, LongHorn Steakhouse and Red Lobster, has long included automatic 18% tips on the bill for parties of eight or more at its more than 2,100 restaurants, but is experimenting with eliminating them because of the IRS ruling, said a spokesman," according to the WSJ.

It's not the first time Darden has tried to avoid the costs of a new Obama policy. The restaurant also tested cutting worker hours to less than 30 hours per week in response to a Health and Human Services regulation designed to force restaurants to provide health insurance coverage to more employees.

“Of note, to the Feds a full-time employee works an average of just 30 hours a week, not the normally accepted 40 hours,” The Washington Examiner's Paul Bedard explained. “The IRS rule is key because companies with more than 50 full-time employees must provide health insurance under Obamacare, or be fined.”

The Wall Street Journal asked a waitress who makes $4.25 an hour, plus tips, what she thinks of the rule.

"I don't want my tips to be on my paycheck as a wage," Jamie Cordoba said. "In this industry, that's what we live on. If I had to wait two weeks I don't know how I'd survive."

Obama is personally a pretty good tipper -- he left a 52 percent tip on an $89.64 tab for a meal for nine after a lunch with college students in New York in August, according to USA Today.

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