Pilot tip reporting program for food and beverage employees extended through 2011

A popular tip reporting program for employers in the food and beverage industry has been extended, the IRS recently announced. Food and beverage industry employers that participate in the Attributed Tip Income Program (ATIP), and which remain compliant, are generally free from IRS tip examinations.

Voluntary program

The IRS has long been very aware of underreporting of tip income. Most tips are in cash and can easily be ignored when reporting. To combat tip underreporting, the IRS designed several tip reporting programs, including ATIP.

Food and beverage employers that 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. ATIP also provides an incentive to participating employees because the IRS will not examine a participating employee's tip income unless he or she reports on their tax return an amount of tips that is less than the amount reported to the employee on their W-2.

Requirements

ATIP requires at least 20 percent of an employer's receipts be charged receipts with charged tips. The program also requires that at least 75 percent of employees agree to participate. Employers must also satisfy all requirements annually in order to continue to participate in the program.

Extension

ATIP is a pilot program and the IRS intended that it expire after 2009. The IRS recently extended ATIP through 2011.

If you have any questions about the IRS's ATIP program, please call our office.