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The following is an archived video story. The text content of that video story is available below for reference. The original video has been deleted and is no longer available.

Centre Co. restaurant reacts to new IRS tax policy

By: Lauren Hensley

PLEASANT GAP, Pa. -- A new Internal Revenue Service policy taking effect in January may hit wait staff where it hurts the most: their wallets. In reaction to the new policy, local restaurants are being forced to re-think the practice of adding automatic gratuity to the bills of large parties.

Anyone who has worked in the food industry knows the big pay out comes from tips.  At the Red Horse Tavern in Pleasant Gap, parties of six or more will automatically have an 18 percent gratuity charge added to the bill. It's a sure thing for servers when dealing with larger parties, which is a rarity when how much they can profit depends on how much the client tips.

It is their income, Anne Bliss, a waitress at the Red Horse Tavern said.  It is vital.  That is what we make most of our money on.  You are only making $3 an hour otherwise, so youre obviously depent on it.

Beginning in January, the IRS will begin classifying automatic tips as service charges. This means the automatic gratuity will be treated as regular wages, subject to taxing opposed to a traditional tax which the restaurants leave up to the wait staff to report.

Red Horse Tavern owner Justin Leiter said this new policy will ultimately mean more paperwork for bookkeeping. He said he is going to see how the new tax will impact his employees but may consider changing their policy.

I think I will probably discuss it with the staff and maybe do away with auto gratuity, Leiter said.

The tax will go into effect Jan. 1, 2014.

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Edgar Snyder

Washington Times