News & Information
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| For Immediate Release |
Contact: Andy Deloney |
| August 21, 2006 |
517/377-3931 |
IRS To Introduce New Voluntary Tip Reporting Program
The Internal Revenue Service is launching a new voluntary program to clamp down on unreported tips in the food and beverage industry. The program, called Attributed Tip Income Program, or ATIP, will allow food and beverage establishments to report estimated income from tips, based on overall sales, and avoid IRS audits in the process. According to an IRS spokesman, the program is designed to reduce the paperwork for which restaurants are currently responsible, while allowing the IRS to cast a wider net on servers’ tips. "In small businesses, where there is a gray area in the ability to track incomes and expenses, there will always be those people who either misinterpret the law, or don't report their expenses and incomes correctly," IRS spokesman Bill Steiner told the Sacramento (CA) Bee.
With the pilot program, to be launched in January, restaurant owners would estimate the amount of tips collected using a formula based on the total food and beverage sales of the establishment. The formula includes a 2 percent deduction to account for low tippers. The restaurant owner reports that estimated total tip income for employees on their W-2 forms. In exchange, the IRS agrees not to audit the restaurant – or participating employees – for tip income.
The Michigan Restaurant Association is still analyzing the program. On its face, it appears to strive toward employer-friendliness, but a full evaluation is necessary to determine what impact, if any, it will have on the industry. The MRA will have more information soon.
The program is to be launched in January.
Founded in 1921, the Michigan Restaurant Association represents more than 4,500 Michigan foodservice establishments. The foodservice industry plays an integral role in Michigan’s economy, employing more than 436,000 people and creating more than $11.3 billion in total annual sales. For more information, call (517) 482-5244.
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