Nation’s Restaurant News reported that The IRS is becoming much stricter with restaurant tip reporting. A tip is “voluntary, it has to be entirely set by the customer; it has to be the subject of something the customer comes up and not dictated by a policy; and the customer has to decide who gets the tip,” explains Tax Foundation Vice President of legal and state projects, Joseph Henchman. Fixed gratuities, commonly added to large parties’ bills, do not fall under the definition of a tip and are therefore legally considered service charges, which are a part of wages and are to go through payroll accordingly.

The revised IRS Ruling 2012-28 will in turn make included gratuities less attractive for restaurant owners and wait staff, and it will be more difficult to secure wait staff to work large parties since the financial gain is incalculable.

The biggest change the new ruling will incur is that servers will not be able to take their tips home at the end of their shift, but rather their tips will have to go through payroll and they will receive them in their next paycheck. The best way for restaurant owners to navigate this operational transition is to encourage open lines of communication with their servers and ask for their feedback to make their working experience optimal. There are delicate ways to remind patrons to tip without including gratuity.