Internal Revenue Bulletin:  2006-31 

July 31, 2006 

Appendix

Attributed Tip Income Program (ATIP)
Model Employee Participation Agreement
     
I am a tipped employee of (Employer), I work at (Establishment), and by signing this agreement I am choosing to participate in the Attributed Tip Income Program (ATIP) established by the Internal Revenue Service (IRS) in Revenue Procedure 2006-30.
I understand that the benefits and requirements of ATIP are as follows:
  1. Tip reporting not required. As a participating employee in ATIP, I am not required to report tips to Employer for any payroll period beginning with the first payroll period in which this agreement is in effect and continuing with every payroll period thereafter until I revoke this agreement or Employer notifies me that Employer is no longer participating in ATIP.
  2. Attributed tips treated as wages. Under ATIP Employer will calculate a total tip amount for all tipped employees in the establishment. A portion of the attributed tips will be treated as if I had reported that amount as tips to Employer and will be treated as my tip income. This amount will be reported on my Form W-2 as tip income in addition to other wages paid to me by Employer.
  3. Total tip amount calculation. Employer will calculate the total tip amount for the Establishment by multiplying the gross receipts from food and beverage sales of Establishment by the charged tip rate (based on Establishment’s Form 8027 for the prior year) minus two percentage points and attributing the total to all directly and indirectly tipped employees using a reasonable attribution method.
  4. Attribution method. The method Employer will use to attribute tips to tipped employees is
[Employers may also use the agreement to provide an estimate of the tip amount that will be attributed.]
  5. Attributed tips reported on Form W-2. Tips that are attributed to me under ATIP will be reported in Box 1 of my Form W-2 as tips.
  6. Federal income tax returns. To receive the audit protection provided by ATIP I agree to report on my federal income tax return at least the amount of tips Employer reports on my Form W-2. If I report tips below the amount on my Form W-2, I will lose the audit protections offered by ATIP, and will need to have adequate records, such as a daily tip log to substantiate that the amount of tip income I received was less than the amount reported on my Form W-2.
  7. Audit protection. If I report on my federal income tax return the tip amount reported on the Form W-2 that I receive from Employer in connection with my employment at [establishment], the IRS will not audit my tip income received in connection with my employment at [establishment] for the period beginning with the date of this agreement and continuing until the earlier of termination of my employment at [establishment] or termination of Employer’s participation in ATIP.
  8. Effective date of audit protection. Provided I sign this Employee Participation Agreement within 30 days after I became employed with Employer at Establishment, I will be protected from an IRS audit of my tip income received at Establishment beginning on the date I became employed. If I sign this Employee Participation Agreement more than 30 days after I became employed with Employer at Establishment, I will be protected from an IRS audit of my tip income received at Establishment after the date of this agreement unless I revoke my participation or my employer revokes its participation.
  9. Revocation by participating employee. I understand that I may revoke this Employee Participation Agreement in two ways. If I decide to report actual tips for any payroll period to Employer in an amount that is less than the amount that will be attributed, the Employer will no longer attribute tips to me. I may also revoke this Employee Participation Agreement by providing Employer with a signed written notice stating my intent to revoke participation. If my participation in ATIP is revoked for any reason I may not participate in ATIP for the remainder of the calendar year and I must report tips to Employer as required by the Internal Revenue Code. If my participation in ATIP is revoked for any reason I will retain audit protection for tip income for those payroll periods prior to the effective date of the revocation.
  10. Revocation by employer. I understand that the Employer may decide to cease participation in ATIP and if so will provide written notification that it is no longer participating in ATIP. If Employer ceases participation in ATIP for any reason, I may not participate in ATIP for the remainder of the calendar year and I must report tips to Employer as required by the Internal Revenue Code. If my employer ceases participation in ATIP for any reason, I will retain audit protection for tip income for those payroll periods prior to the effective date of the revocation.
  11. General compliance. I agree to file my federal income tax return on a timely basis and report those tips and the rest of my earnings from my job as shown on the IRS Form W-2 that Employer gives me as well as any other income I receive from any other source. Failure to file timely and report my tip income as described in the preceding sentence will result in loss of the audit protection described in paragraph 7.
By signing below, I agree to fulfill my responsibilities under this agreement and to participate in ATIP in accordance with the terms of this Agreement.
 
Signature and Employee’s name printed, address, Social Security Number, and date.
Revenue Procedure 2006-30 may be viewed or printed at http://www.irs.gov/businesses/small/article/0,,id=98944,00.html
 
Revocation Notice
By signing below, I revoke my participation in ATIP.
 
Signature and Employee’s name printed, address, Social Security Number, and date.

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