"The new no tax on tips provision for U.S. workers doesn't apply to mandatory tips, such as those some restaurants require of large parties, the Internal Revenue Service has clarified. Qualified tips must be paid voluntarily by the customer and not be subject to negotiation, said a statement released by the agency on Sept. 28. If a customer has no option to disregard or modify the charge, it cannot be deducted from the employee's income."
"The federal law signed in July allows workers in certain occupations to deduct up to $25,000 in tips from the income reported on their tax filings. Last week, the IRS released a list of eligible occupations those whose workers it says customarily and regularly receive tips. It designated about 70 jobs, including many restaurant and hotel workers, gambling dealers, babysitters, taxi and rideshare drivers, hairdressers, physical trainers, caddies, locksmiths and self-enrichment teachers."
The IRS clarified that the tax exclusion for tips excludes mandatory tips and service charges imposed without customer choice. Qualified tips must be voluntarily paid by the customer and not be subject to negotiation; charges that customers cannot disregard or modify cannot be deducted from employee income. Restaurants commonly impose automatic gratuities—generally 18%—for large parties, and some establishments have applied mandatory tips to much smaller groups. The July federal law allows workers in certain occupations to exclude up to $25,000 in tips from taxable income. The IRS designated about 70 eligible occupations, covering many hospitality and personal-service roles.
Read at www.mercurynews.com
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