Service charges vs. tips

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Remember, service charges do not receive the same tax treatment as tips. Service charges are non-tip wages, and employers must treat them as such for tax withholding and filing requirements. Tips are payments made to employees by customers at the customer’s discretion. Service charges are extra fees a customer must pay to a business. Examples of service charges are fees imposed by restaurants for parties of six or more, cruise ship package fees, and hotel room service charges.

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