In April, the IRS announced it’s looking at new ways to utilize technology to increase restaurant tip reporting. This could include updating the voluntary tip-compliance agreements the agency currently offers restaurant companies, such as the TRAC (Tip Reporting Alternative Commitment) and TRDA (Tip Rate Determination Agreement).
Falling under the IRS responsibility of ‘Enforcement’, this measure is to ensure that restaurants provide employees with the proper information and tools needed to report all tips. Historically, restaurants have complied by hanging posters, providing systematic education and informing employees about charged sales, charged tips and cash sales. All efforts are important components of protection from the threat of an IRS employer-only assessment.
Bottom line: Restaurants must provide employees with the proper information and tools to report all tips. For more information on tip reporting, visit the IRS online.