Madison Originals Magazine Madison Originals Magazine May 2014 | Page 36

dining

AUTOMATIC
BY VIVIAN OBARSKI

It is no secret that many servers depend
on tips to make ends meet. Now it may
be tougher thanks to a January 1 change
in IRS law. The revision “basically
eliminates automatic gratuity,” says
Kim Ruef, owner of TRUE Consulting,
which offers bookkeeping services to
business clients. The modification states
that automatic gratuity for large parties
(usually parties of six or more) can be
considered a service charge, which is
subject to IRS reporting.
“What you end up with is a situation
that when a larger group comes in, if you
add an automatic gratuity, the server isn’t
provided access to the funds and they
have to be put through payroll taxes,”
said Krys Wachowiak, Co-Proprietor of
L’Etoile and Graze. “From the server’s
side, it makes it more difficult to keep
track of things.”
The problem is that depending on the
restaurant, some are still using automatic
gratuity, such as Graze and L’Etoile. But
others are eliminating the automatic
gratuity, which adds to the confusion.
“What the general population should
know is that in situations where they

36 | m a d i s o n o r i g i n a l s m a g a z i n e

Gratuity

assumed there would be an automatic
gratuity, it won’t necessarily be the case
anymore,” Krys says.
“We’re paying close attention to servers
who are working the floor and their
perspective on things,” Krys says. “At
L’Etoile and Graze, we have decided to
keep the auto-gratuity because it protects
our servers. Over the past 25–30 years,
we’ve seen automatic gratuities become
more standardized to protect servers.”
Krys adds, “Now we’re seeing—because
of the additional cost with accountants
and headaches—more restaurants say
they’re going to get rid of auto-gratuity
because it costs more money on the
bookkeeping end, and the servers don’t
want to wait for their monies.”
There isn’t one true perspective from
his servers, Krys says. Some don’t mind
having automatic gratuities withheld
because it saves them from a large
tax burden at this time of year, when
they’re not earning so much from
customers. “Servers are talking about
tax liabilities,” he says. “I’ve been in the
industry for 20 years, so I understand
that you had to save money for a rainy
day. But when you remove the automatic

gratuity, it becomes a little riskier for
servers.”
Kim explains that customers can expect
to see restaurants educating patrons
more about the changes. Referring to one
client, she says th