[Bill14564]

Originally Posted by retiredguy123

I would just add that the IRS does not consider any mandatory payments for service to be "tip" income that would qualify for the special tax treatment rules that they use. For example, the restaurant could not include mandatory service charges on their W-2 forms as an "allocated tip". And the restaurant could not use mandatory service charges as a credit towards their minimum wage calculation, if they are paying servers less than the minimum wage.

I understand it that way too which is why I dislike the practice so much. I believe the restaurant is allowed to use any or all of the mandatory service charge as part of the tipped-minimum wage that they are required to pay the servers. Essentially, the mandatory *service* charge becomes a "because we don't want to raise our prices" charge. To me that is dishonest and deceiving and I would have a very hard time going back to that restaurant.

But if the restaurant is going to list it as a "service charge" and is over and above the price for the meal then I am going to treat it just that way: as a charge for the service I received which is over and above the labor amount included in the price of the meal. That may not work out well for the server which ultimately may not work out well for the restaurant.