| ATIP: Simplified Reporting | |
The IRS has developed a simplified recordkeeping system for tip reporting called ATIP. Basically, the
restaurant calculates tips on a percentage basis for all employees, rather than having each employee maintain individual records.
To participate, employers need to check a box on Form 8027, Employers Annual Information Return of Tip Income.
Each employee must also agree in writing. Click here for more information.
Click here for a sample employee participation agreement.
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| Forms to use | |
Daily Tips Form (only required for employers not using the ATIP program) |
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| What to do: employees |
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(Not required if employee signs up for ATIP.) Employees should keep a record of their tips. Employees may request a booklet from the
IRS or they can use the copy included here. Preferably every pay period, but at a minimum, once a month,
the employee should provide the totals to the employer (see page 2 of attachment).
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| What to do: employers |
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Add the reported tips to the employee's normal wages and calculate taxes accordingly.
You may not require the employee to give you their tips in cash. This is strictly a reporting requirement. Both the employee
and the employer must pay employment taxes on these tips.
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| Report at least 8% of receipts |
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Employees must report at least 8% of the business' receipts as tips. If they report less,
at year-end the employer must allocate any shortage to the employees.
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| At year-end: unreported tips |
| Employers must report the total wages and reported
tips on the employee's W-2 form. If there is
a shortage from the required 8% and tips must be allocated, the allocated tips must be shown on line 8 of W-2.
Employees must pay social security taxes on any allocated tips using
IRS form 4137.
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| Tip income not used to calculate minimum wage |
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Tips may not be included in determining whether an employee has been paid minimum wage unless
the state has specifically authorized this.
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| Questions? | |
Call the IRS information hotline (800) 829-4933. For booklets, call
(800) 829-3676 or obtain it online, visit http://www.irs.gov/formspubs/index.html.
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