IRS Extends Tip Income Program

The IRS has extended the 2007 deadline until June 30 for restaurant or beverage businesses to elect to participate in the Attributed Tip Income Program.

The extension is in response to requests from restaurant and beverage industry members and is only applicable for the 2007 calendar year.

Normally, eligible establishments must elect to participate in ATIP by Feb. 28 when they timely file their Form 8027, “Employer’s Annual Information Return of Tip Income and Allocated Tips.”

To participate in the program for calendar year 2007, employers should have started to attribute tips under the provisions of Revenue Procedure 2006-30 beginning with the first payroll period on or after Jan. 1, 2007. However, for calendar year 2007 only, employers will be granted until June 30, 2007, to begin the tip attribution process and make the election to participate in ATIP. As long as the employer notifies the Service that they would like to participate in the program via Form 8027, the safe-harbor protection will begin the first pay-roll period that the employer attributes tips based on the prescribed formula under the Revenue Procedure. The ATIP participation extension does not extend the Form 8027 filing deadline.

If the employer has already filed Form 8027 without electing ATIP participation, but now desires to participate, the employer should file a duplicate Form 8027 before June 30, 2007, electing to participate in the ATIP with a notation “Duplicate Filing to Elect ATIP Participation” prominently displayed on the Form. A copy of the duplicate filing must also be sent to the attention of the Employment Tax/ATIP Coordinator in Covington, Ky., as prescribed in the Revenue Procedure.

The IRS announced ATIP on July 28, 2006. The program provides employers in the food and beverage industry with an alternative option that encourages voluntary tip income reporting by tipped employees. ATIP provides the following significant benefits for the employer and the tipped employee:

  • Reduces recordkeeping burdens for the employer and the tipped employee

  • Simplifies enrollment procedures, no one-on-one meetings with the IRS

  • Promotes accurate reporting of tip wages on federal income tax returns using the business owners records

  • Provides safe-harbor protections against tip audits for the employer and the participating employee

  • Eliminates financial hardships associated with unplanned tax liabilities resulting from tip audits.

Details and requirements for participation for employers and employees are available in Revenue Procedure 2006-30.

You may like these other stories...

For bitcoin users, the taxman cometh. And you best know how to calculate taxes owed on what the IRS calls convertible virtual currency.In March 2014, the IRS issued Notice 2014-21, which declares virtual currency will be...
Majority of House of Representatives urges leadership to preserve cash method of accounting for tax purposesA bipartisan majority of the House of Representatives – 233 members – has signed a letter urging House...
More than 1 million tax payments have been processed so far in 2014 through IRS Direct Pay, a free web-based payment system that debuted earlier this year, the tax agency announced on Wednesday.Available through the Pay Your...

Already a member? log in here.

Upcoming CPE Webinars

Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.