Our restaurant adds an automatic service charge. Can payroll treat that the same as customer tips?
I live in the UK and own a U.S. restaurant through an LLC. We recently started adding an automatic service charge for larger tables, and internally some people keep talking about that money as if it were just another form of tip. I am not convinced that is safe, because it feels like the charge is mandatory rather than discretionary.
I am trying to understand whether the IRS really treats an automatic service charge the same way as a voluntary customer tip for payroll and reporting purposes. If the answer is no, I would rather fix the setup now before the year-end restaurant payroll file is built on the wrong assumption.
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