Four casino workers at the Virgin River hotel-casino in Mesquite, Nevada have been sentenced after pleading guilty to criminal charges stemming from underreporting tip income on their income tax returns. "This is the first criminal prosecution regarding tip compliance in the country, and its consequences apply to all tip-earning employees everywhere, not just Nevada casino dealers," said Byram Tichenor, Internal Revenue Service special agent in charge of criminal investigation in Nevada.
Casino comptroller Dale Siepp and three dealers, Belinda Mosdell, Leveda Taylor, and Leo Shan How, underreported tip income by fabricating records. The workers reported their average tip was $5.50 per hour, but other dealers in the same area and time frame reported tips in the range of $7.05 to $10.46 per hour. The four not only cheated on their own tax returns but helped dozens of co-workers cheat on their taxes as well, according to Natalie Collins, spokeswoman for the U.S. attorney's office in Las Vegas.
The IRS has increased efforts to encourage workers in the hotel, restaurant, and related industries to report tip income. It is believed that somewhere in the range of $5 to $8 billion in tip income goes unreported each year.
Earlier this year, the U.S. Supreme Court ruled that the Internal Revenue Service has the right to arbitrarily assess Social Security tax to restaurants and other businesses where employees regularly receive tips if the Service has reason to believe employees of the business are underreporting tip income.
The four Nevada employees were each sentenced to six months in prison and required to pay restitution to the IRS in amounts ranging from $1,100 to $1,500 each.