How to Untangle the Confusion About Tips and Service Charges

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How to Untangle the Confusion About Tips and Service Charges

By Jay Starkman and Alex Nadal

When a customer pays the bill at a restaurant, the difference between paying a tip or a service charge is usually not a big deal. But for the restaurant owner (the employer), the server (the employee), and the Internal Revenue Service (IRS), the difference can be a huge deal.

Wage and hour and tax reporting rules for employers are complicated. They vary widely by state, and requirements are changing all the time. Employers, especially those in service industries such as restaurants, hotels or salons, should understand the distinctions and how they impact wage calculations and employee and tax reporting requirements under the law.

As reported in the Business Journals

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Annual revenue growth for small businesses that use a professional employer organization  (PEO)  is double that of comparable non-PEO firms, and companies that use a PEO are also 16 percent more likely to report an increase in profitability, according to a new study released today by the National Association of Professional Employer Organizations (NAPEO) at its annual conference in Orlando.

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Engage CEO Jay Starkman is quoted in this article from Bloomberg.  Read this news

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