The Internal Revenue Service released formal guidance on its new tip reporting procedure, the Attributed Tip Income Program.

ATIP was designed with the ultimate goal of reducing recordkeeping burdens. The agency said the additional program option has simple enrollment requirements and promotes reporting tips on federal income tax returns. Like other tip reporting programs, participation is voluntary.

Employers who participate in ATIP report the tip income of employees based on a formula that uses a percentage of gross receipts, which are generally attributed among employees based on the practices of the restaurant.

Among the employer and employee benefits of participating in ATIP:

  • The IRS will not initiate an "employer-only" examination during the period the employer participates in ATIP; and,
  • Enrollment and tip reporting is simplified, in many cases employers will not have to receive and process tip records from participating employees.

Likewise, e mployees also benefit from ATIP:

  • Participating employees do not have to keep a daily tip log or other tip records;
  • The IRS will not initiate a tip examination during the period the employer and employee participate in ATIP; and,
  • The improved income reporting procedures could help employees qualify for loans or other financing.

ATIP is a three-year pilot program for food and beverage employers. Employers will participate on an annual basis, with the first period beginning Jan. 1, 2007More information on the program, and general requirements for participating restaurants is available at

Previously on WebCPA:

IRS Extends Tip Compliance Agreement Program (Sept. 17, 2004)

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