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Voluntary Tip Compliance Agreements

The IRS recently completed a series of employee audits for fiscal year 2016. The IRS is now beginning the review of “inclined” employees for fiscal year 2017 and is expanding its targets to additional casinos and gaming sites. Many Las Vegas residents rely on tips to supplement their wages. For these employees, it is important to understand participation agreements and opt-out risk. The IRS actively reviews workers who do not participate in their employers` collective agreements. Keep detailed records of advice that are paid to others by tip-sharing or tip-pooling-agreements. The Market Segment Understandings program has voluntary compliance agreements for areas where tips are common. The IRS has expanded its voluntary compliance programs for the food and beverage, gaming and hairstyling industry to include all those in which tips are common (advertisements 2000-19 and 2000-23; Note 2000-21). In exchange for the participation of an employer or employee, the IRS agrees to forego the tip review.

Many advice reporting agreements allow the employer to calculate an employee`s advice using tip rates and other information. The IRS launched the National Tip Reporting Compliance Program (NTRCP) to help employees report their best income. The IRS NTRCP enters into tipping agreements with employers: in Las Vegas, these agreements are referred to by the acronyms GITCA (Gaming Industry Tip Compliance Agreement) and TRDA (Tip Rate Determination Agreement). When an employee opts for a strike agreement, the employee is considered a “tip-konform” and should not be reviewed by the IRS with respect to the best income. In addition, some tipping agreements offer employers protection against tipping tests as long as the employer meets the terms of the agreement. Similarly, workers who participate in these agreements are excluded from tipping tests as long as they meet their participation requirements. Voluntary agreements improve compliance with tips for workers and their employers through education and accounting, internal controls as opposed to enforcement measures such as audits. The Understandings-Program market segment has voluntary compliance agreements for areas where advice is common.

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