Tip Compliance

Tip Compliance a Hot Issue in Your IRS Audit? Contact an Experienced Attorney

An often "hot" issue with the IRS is that of tips that waiters and waitresses collect in cash — funds which may leave no paper trail. The IRS is interested in ensuring that waiters and waitresses claim their tips on tax returns. In other professions, also, cash dealings may be left to the honesty of taxpayers when it comes to claiming income and paying income tax. The publicity given to the importance of tip compliance serves as a reminder of the principle that all income should be reported, regardless of whether it appears on a paycheck.

The IRS is Interested in Tracking Down Lost Income Tax Due to Underreporting Tips

One or two waiters or waitresses who fail to report their tips for tax purposes may leave an insignificant amount of income unaccounted for with the IRS. However, all waiters and waitresses nationwide, month after month and year after year, together earn billions of dollars in tips. Failure to include this income in tax returns results in great losses to the government.

Was Your Bar or Restaurant Observed or Raided?

In an effort to keep business owners aware of this issue, the IRS sometimes makes raids upon restaurants and bars to check on what methods management uses to ensure compliance in tip reporting by waiters and waitresses. Do managers ask for a full accounting from each food server at the end of every shift and enter tips collected on the books? Are employees made aware through training that tips must be reported as income?

If you, the business owner or manager, have been subjected to questioning or investigation about your employees' tips and reporting procedures, you are strongly encouraged to discuss the situation with an experienced tax lawyer. Were IRS agents observing operations at your place of business? Have you been issued a subpoena of records and training materials? Contact Brown, PC to schedule a consultation.

Call Toll Free to Schedule a Consultation on Tip Compliance and the IRS

Employers are welcome to contact Lawrence Brown from anywhere in North America regarding tip compliance and potential tax litigation. Call 888-870-0025 or e-mail our Dallas-Fort Worth, Texas, law firm.

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