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Federal agency cracking down on tax fraud by restaurant workers

It does not matter if you are one of our local Pittsburgh readers or live in another part of the country, the Internal Revenue Service wants to make sure that you pay the appropriate amount in taxes.

Over the years, restaurant workers have gotten a bad rap for not paying the IRS tax on all of the cash tips they receive. To crack down on this, the IRS created new rules this year to regulate how servers get paid.

Not only is this law impacting the many restaurant workers throughout the country, but the same holds true for those who are eating out and take notice of their check.

According to new laws, automatic gratuities are now taxed as services charges. By doing this, the IRS is taking another step in ensuring that restaurant workers are unable to pocket tip money tax free, something that many are accustomed to doing.

The vice president of legal and state projects at the Tax Foundation said, "In the restaurant industry, the margins are really thin. A lot of restaurants fail each year because it's a tough industry. It's very competitive, and it's hard to make money doing it. I think a lot more thought should have been put into the consequences for a rule change like this."

There are people on both sides of this change, with some feeling that it is the right move and others believing that the IRS is overstepping its bounds. Regardless, restaurant workers and restaurant owners need to be aware of these changes, ensuring that they are not accused of tax fraud down the road.

Source: Citizen-Times, "IRS cracks down on restaurant servers" Mackensy Lunsford, May. 23, 2014

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