On December 1, 2009, the Internal Revenue Service issued Revenue Procedure 2009-53, which extended the Attributed Tip Income Program (ATIP). Set to expire on December 31, 2009, the ATIP program is now extended through December 31, 2011. The ATIP program is a voluntary reporting program under which a participating employer reports tip income of its employees based on a formula using the employer’s gross receipts, which are generally allocated among employees based on the practices of the restaurant. ATIP is the next generation of the IRS’s Tip Rate Determination/Education Program (TRD/EP), which began in 1993 and was designed to enhance tax compliance among tipped employees through taxpayer education and voluntary agreements instead of traditional audit techniques. ATIP differs from the existing programs in that it does not require an employer to enter into an individual agreement with the IRS. ATIP does not alter any of the existing TRD/EP programs. Employers currently participating in an existing TRD/EP program may elect to switch to ATIP. Participating employers and employees received significant benefits by participating in the ATIP program.
Participating employers will not be subject to an “employer-only” examination during the period it participates in ATIP. In addition, tip reporting is simplified, and in many cases, participating employers will not have to receive and process tip records. Participating employees do not have to keep a daily tip log or other tip records.
In order to participate in the ATIP program, employers must meet two basic requirements. First, at least 20 percent of the employer’s gross receipts must be charged receipts (credit card charges and charges under any other credit arrangement, e.g., house charges, city ledgers and charge arrangements to country club member, plus debit card sales) with charged tips (tips included on charge receipts). Second, at least 75 percent of the employer’s tipped employees must sign employee participation agreements. An eligible employer may elect to participate in the ATIP program by simply checking the designated box on Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Form 8027 is available on IRS.gov, or by calling the IRS toll-free at 800-TAX-FORM (829-3676). Revenue Procedure 2006-30, which provides details and requirements for participation in the ATIP program, may be viewed or printed at http://www.irs.gov/businesses/small/article/0,,id=98944,00.html