IRS Simplifies Tip Reporting

IRS Simplifies Tip Reporting

The Internal Revenue Service today released formal guidance on its new tip reporting procedure, the Attributed Tip Income Program (ATIP) ATIP expands the existing IRS tip reporting and education program by offering employers in the food and beverage industry an additional tip reporting program. ATIP reduces industry recordkeeping burdens, has simple enrollment requirements and promotes reporting tips on Federal income tax returns.

ATIP provides benefits to employers and employees similar to those offered under previous tip reporting agreements. However, ATIP does not require employers to meet with the IRS to determine tip rates or eligibility. Employers are not required to sign an agreement with the IRS to participate. Like other tip reporting programs, participation by employers and their employees is voluntary.

Employers who participate in ATIP report the tip income of employees based on a formula that uses a percentage of gross receipts, which are generally attributed among employees based on the practices of the restaurant.

Employers receive significant benefits by participating in ATIP:

  • The IRS will not initiate an “employer-only” 3121(q) examination during the period the employer participates in ATIP.
  • Tip reporting is simplified and in many cases, employers will not have to receive and process tip records from participating employees.
  • Enrollment is simple.  There are no one-on-one meetings with the IRS and no agreements to sign.  Employers elect participation in ATIP by checking the designated box on Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips.

Employees also benefit from ATIP:

Participating employees do not have to keep a daily tip log or other tip records.

  • The IRS will not initiate a tip examination during the period the employer and employee participate in ATIP.
  • Improved income reporting procedures could help employees qualify for loans or another financing.
  • Employees who work for a participating employer can easily elect to participate in ATIP by signing an agreement with their employer to have their tip income computed under the program and reported as wages.

Some general requirements for participating restaurants:

  • The employer annually elects to participate in ATIP and uses the prescribed methodology for reporting tips by filing Form 8027 and checks the ATIP participation box.  Simplified filing is provided for small establishments not required to file Form 8027.
  • Employer’s establishment must have at least 20% of gross receipts as charged receipts that reflect a charged tip.
  • At least 75% of tipped employees must agree to participate in the program.
  • Employer reports attributed tips on Employees’ Forms W-2 and pay taxes using the formula tip rate.
  • The formula tip rate is the charged tip rate minus two percent – the two percent takes into account a lower cash tip rate.
  • The charged tip rate is based on information from the establishment’s Form 8027.

ATIP is a three-year pilot program for food and beverage employers.  Employers will participate on an annual basis. The first annual basis begins on January 1, 2007.

Details and requirements for participation for employers and employees are available in Revenue Procedure 2006-30

———————————————————————————————————————————————————————-

We hope you found this article about “IRS Simplifies Tip Reporting” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe our YouTube Channel for more updates.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

 

Alan L. Olsen, CPA, Wikipedia Bio

 

 

GROCO.com is a proud sponsor of The American Dreams Show.

 

American-Dreams-Show-Accounting-firm-in-ca-cpa-tax-advisors-groco-alan-olsen

The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

Untitled_Artwork copy 4

MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

/GROCO
Posted in
Tax Forms

Tax Forms & Publications

Tax Forms & Publications The publications listed below are located on the IRS web site and require Adobe Acrobat to view. Visit the Adobe Web Site to install the latest version of Acrobat Reader. Publication 1 Your Rights As a Taxpayer Publication 3 Armed Forces’ Tax Guide Publication 15 Circular E, Employer’s Tax Guide Publication…

Hall Of Laughter

Hall Of Laughter

Hall Of Laughter In memory of Steve Gardner 1958-2010 Thanks for the accounting humor and endless hours of laughter. We love you! Three Blind Mice Audit The IRS Agent uses a math joke in his audit of the three blind mice. Accounting Puppets 2 Puppets tell Accounting and Audit Jokes. Accounting Puppets Puppets tell Accounting…

The Roth Way to Riches

The Roth Way to Riches By Roy Lewis With all the recent tax-code changes, it seems a number of taxpayers have forgotten the Roth IRA. That’s a shame, because it’s far more than an ordinary retirement savings account. Roth IRAs are tax-favored accounts to which qualified taxpayers can make non-deductible, after-tax contributions. Those contributions can…