The Internal Revenue Service (IRS) is interested in updating its suite of voluntary tip compliance agreements and, as part of this process, is seeking public comments.
In Announcement 2012-25, 2012-26 I.R.B. 1054, the IRS stated that it planned to solicit public comments on possible changes to the existing Tip Rate Determination and Education Program (TRDEP). In particular, the IRS is interested in public comments regarding updating two types of voluntary tip compliance agreements under TRDEP, namely, Tip Rate Determination Agreements (TRDAs) and Tip Reporting Alternative Commitments (TRACs).
The IRS introduced TRDEP in October 1993 to the food and beverage industry. In the years that followed, TRDEP was expanded to the cosmetology, transportation, gaming, and other tipping industries. TRDEP is voluntary and focuses on education and voluntary tip compliance agreements rather than traditional enforcement actions. Over subsequent years, the IRS developed and updated voluntary tip compliance agreements to help employees accurately report their tip income and to help employers meet their filing and reporting obligations.
TRDAs and TRACs have been in existence since the 1990s and may not take advantage of advances in Point of Sale systems and electronic payment settlement method technologies.
The Gaming Industry Tip Compliance Agreement (GITCA), also part of TRDEP, was updated in 2007 by Rev. Proc. 2007-32, 2007-22 I.R.B. 1322. Therefore, the IRS is not seeking comments on GITCA at this time.
A key objective of updating TRDAs and TRACs is to improve employee tip reporting compliance and utilize technological advancements to decrease taxpayer and administrative burden. The new agreements will incorporate:
A greater emphasis on computations derived from Point of Sale systems and the use of electronic payment settlement methods, i.e., credit and debit cards
A greater emphasis on accurate tip reporting by indirectly tipped employees
The distinction between tips and service charges
A commitment by the IRS not to initiate a tip examination on participants
A streamlined agreement
Updated definitions
Simplified, expedited education requirements for existing employees
Streamlined application and termination procedures
A streamlined process to add additional establishments to existing agreements
Streamlined access to TRDEP resources to assist with agreement administration
The IRS is seeking comments on the manner to incorporate the items listed above and other items the public believes would increase tip reporting compliance and ease taxpayer burden. The IRS welcomes comments on all aspects of TRDAs and TRACs but is particularly interested in suggestions regarding processes, computational methodologies, agreement language, and suggested topics for “Frequently Asked Questions.” Electronic samples of the existing TRDAs and TRACs (some industry specific) are available on IRS.gov; enter “MSU tips” in the search box. They may also be obtained from the IRS office listed below:
Internal Revenue ServiceComments may be submitted on or before [Insert 90 day period], either electronically at TIP.Program@irs.gov or in writing to the IRS office listed above.
Please include the number of this announcement in the subject line of your email or in the header of your written comments.
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