Hertsel Shadian, Attorney at Law, LLC

IRS’s Food Industry Tip Reporting Program Extended 2 Years

19 July 2010

The Internal Revenue Service in late 2009 extended for an additional two years its program that simplifies the record-keeping burden for reporting tip income in the food and beverage industry.  The Attributed Tip Income Program (ATIP) was first announced in 2006 in Revenue Procedure 2006-30. The program, which was originally set to expire Dec. 31, 2009, was extended to Dec. 31, 2011, under Revenue Procedure 2009-53.

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 allocated among employees based on the practices of the restaurant. From the perspective of the IRS, both employees and employers benefit from participation in the ATIP program. The IRS agrees not to initiate a tip examination during the period the employer and employee participate in ATIP, and participating employees do not have to keep a daily tip log or other tip records.

Enrollment in the ATIP program is simple. Employers elect participation by checking the designated box on Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. 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.

Form 8027 is available on www.IRS.gov, by clicking on the following link Form 8027 (and Form 8027 instructions), or by calling the IRS toll-free at 1-800-TAX-FORM (829-3676).