DIANNE MARQUARD: HELLO, AND WELCOME TO THE IRS' NATIONAL TIP REPORTING COMPLIANCE PROGRAM WEBINAR SERIES. MY NAME IS DIANNE MARQUARD. BEFORE WE GET STARTED ON TODAY'S TOPIC, I WANT TO GIVE YOU A BRIEF OVERVIEW OF THE TIP WEBINARS THAT ARE AVAILABLE AT WWW.IRSVIDEOS.GOV. THESE WEBINARS WILL ASSIST TIPPED EMPLOYEES AND EMPLOYERS WITH TIP REPORTING OBLIGATIONS AS WELL AS EDUCATE EMPLOYERS ON THEIR TIP REPORTING REQUIREMENTS UNDER THE TERMS OF A TIP AGREEMENT. FOR TIPPED EMPLOYEES, WE HAVE 3 WEBINARS. TIP INFORMATION FOR THE GENERAL AUDIENCE IS OUR MOST GENERAL WEBINAR TO PROVIDE AN OVERVIEW OF TIP TAX LAWS AND REQUIREMENTS. TIP INFORMATION FOR THE COSMETOLOGY INDUSTRY WEBINAR PROVIDES THE SAME GENERAL REQUIREMENTS, BUT ALSO ADDRESSES THE UNIQUE NATURE OF THIS INDUSTRY.

EMPLOYEES PARTICIPATING IN TIP AGREEMENTS WITH TIP RATE WILL EXPLAIN THE MANY BENEFITS AVAILABLE TO TIPPED EMPLOYEES, WHO WORK FOR EMPLOYERS WITH TIP AGREEMENTS. ARE YOU A LARGE FOOD AND BEVERAGE TAXPAYER, WHO COULD USE SOME ADVICE ON PREPARING AND FILING FORM 8027? PLEASE CHECK OUT THE WEBINAR ON LARGE FOOD AND BEVERAGE TAXPAYERS FORM 8027 REQUIREMENT. IT PROVIDES MANY HELPFUL HINTS TO ACCURATELY PREPARE AND FILE YOUR FORM 8027. IF YOU'RE AN EMPLOYER WHO PARTICIPATES IN THE TIP PROGRAM, THEN CHECK OUT THE EMPLOYER COMPUTED TIP RECORDING PROCESS CERTIFICATION FOR GAMING INDUSTRY TIP COMPLIANCE AGREEMENT. WE ALSO REFER TO THIS AS PAYROLL CERTIFICATION. ALTHOUGH, THIS WEBINAR IS FOR GAMING TIP AGREEMENT, IT HAS USEFUL INFORMATION TO ASSIST WITH UNDERSTANDING AND SETTING UP YOUR TIMEKEEPING AND PAYROLL SYSTEMS TO ACCURATELY TRACK AND APPLY THE TIP RATE. YOU NEED TO EDUCATE NEW HIRES ON THE TIP PROGRAM? USE THE EMPLOYEES PARTICIPATING IN TIP AGREEMENTS WITH TIP RATE, A GREAT SUMMARY TO EXPLAIN THE ROLES AND OBLIGATIONS OF EACH TIPPED EMPLOYEE PARTICIPATING OR NOT PARTICIPATING IN THE TIP AGREEMENT. AND FINALLY, DO YOU GET QUESTIONS ON PREPARING YOUR ANNUAL REPORT; YOU'VE COME TO THE RIGHT PLACE. THE TIP AGREEMENT YEAR-END REPORTING REQUIREMENTS WILL ASSIST YOU IN PREPARING AND SUBMITTING THE FORM 14439 EMPLOYEE DATA REPORT.

WE'RE GOING TO HEAR ALL ABOUT THAT TODAY. AGAIN, WELCOME TO THE NTRC WEBINAR SERIES. LET'S GET STARTED. OUR PRESENTERS TODAY ARE WALTER BUDZINSKI AND JENNIFER CUNNINGHAM BOTH SENIOR PROGRAM ANALYST, AND TERRI VRABEL, GROUP MANAGER FOR THE WEST TERRITORY. ALL OUR SUBJECT MATTER EXPERTS WORKING IN THE IRS'S NATIONAL TIP REPORTING COMPLIANCE PROGRAM ALSO KNOWN AS NTRC. THE NATIONAL TIP REPORTING COMPLIANCE ADMINISTERS THE ENTIRE TIP PROGRAM FOR ALL EMPLOYERS, SMALL AND LARGE IN THE TIPPING INDUSTRY, EXCEPT FOR THE INDIAN TRIBAL GOVERNMENT, KNOWN AS ITG. WHILE ITG MAY HAVE SIMILAR TIP REQUIREMENTS, THEY WILL NOT BE DISCUSSED DURING THE TIP WEBINAR SERIES. SO, WALTER, CAN YOU GET US STARTED WITH SOME BACKGROUND INFORMATION? WALTER BUDZINSKI: YES. THANKS, DIANNE.

NTRC WORKS WITH YOU THE TIP EMPLOYER TO ENTER INTO TIP AGREEMENTS TO IMPROVE TAX COMPLIANCE ON TIPPED EMPLOYEES AND WITHIN THE TIPPING INDUSTRY. LET'S START WITH A LITTLE HISTORY. THE TIP PROGRAM IS VOLUNTARY AND BEGAN IN THE 1990S IN LAS VEGAS. IT EXPANDED NATIONWIDE AS THE VARIOUS STATES VOTED TO BRING GAMING TO THEIR STATES. WE CURRENTLY HAVE 1,000S OF TIP AGREEMENTS FOR ALL TYPES OF TIPPING INDUSTRIES AND CONTINUE TO EXPAND THE PROGRAM IN THE VARIOUS AREAS. TO PARTICIPATE IN A TIP AGREEMENT, THE EMPLOYER MUST COMMIT TO CERTAIN OBLIGATIONS AND RESPONSIBILITIES. DURING THIS WEBINAR SERIES, WE WILL DISCUSS THE YEAR-END REPORTING REQUIREMENTS FOR THE VARIOUS TYPES OF TIP AGREEMENTS, AND HOW WE CAN WORK TOGETHER TO IMPROVE THE YEAR-END REPORTING PROCESS. IN PARTICULAR, WE WILL DISCUSS A TIP EMPLOYEES PARTICIPATION STATUS, HOW TO PREPARE AND FORMAT THE REPORT FOR SUCCESSFUL SUBMISSION, HOW TO IDENTIFY, CORRECT AND AVOID COMMON ERRORS AND VALIDATION OF DATA ACCURACY. BEFORE YOU CAN IMPROVE SOMETHING YOU MUST UNDERSTAND HOW IT WORKS, RIGHT? SO, TODAY, WE'RE GOING TO SHARE SOME HELPFUL HINTS ON HOW TO PREPARE THE FORM 14439 EMPLOYEE DATA REPORT. BUT, FIRST, I'D LIKE TO BEGIN WITH A BRIEF OVERVIEW OF THE 3 REPORTS THAT ARE REQUIRED, FORM 14439 EMPLOYEE DATA REPORT IS AN ANNUAL EMPLOYEE DATA REPORT OF TIPPED EMPLOYEES THAT WORKED FOR YOU DURING THE PREVIOUS CALENDAR YEAR. DEPENDING ON THE TERMS OF YOUR AGREEMENT, YOU MAY BE REQUIRED TO REPORT ON ALL TIPPED EMPLOYEES OR MAY BE LIMITED TO REPORTING ONLY NON-PARTICIPATING EMPLOYEES, NON-PARTICIPANTS ARE TIPPED EMPLOYEES WHO DIDN'T PARTICIPATE DURING THE ENTIRE CALENDAR YEAR THE PROGRAM WAS AVAILABLE. THEY'RE CONSIDERED NON-PARTICIPANTS AND MUST ALWAYS BE INCLUDED ON THE FORM 14439 WHEN SUBMITTED. IT IS VERY IMPORTANT THAT THE EMPLOYEES' PARTICIPATION STATUS IS ACCURATE ON THIS REPORT. LATER IN THE PRESENTATION, WE WILL DISCUSS HOW TO MAKE THIS DETERMINATION. YOU MUST ALSO FILE FORM 8027, THE EMPLOYER'S ANNUAL INFORMATION RETURN OF TIP INCOME AND ALLOCATED TIPS. IF YOU OPERATE A LARGE FOOD OR BEVERAGE ESTABLISHMENT, THE INSTRUCTIONS TO THE FORM HAVE A WORKSHEET TO HELP DETERMINE IF AN ESTABLISHMENT IS LARGE AND IS REQUIRED TO FILL OUT THE FORM. THERE IS ALSO A WEBINAR ON FORM 8027 ON IRSVIDEOS.GOV. THE THIRD REPORT THAT MUST BE FILED ANNUALLY IS A PAYROLL DATA REPORT GENERATED FROM YOUR TIME-AND-ATTENDANCE SYSTEM OR PAYROLL SYSTEM THAT SHOWS THE TIP RATES YOU APPLY TO PARTICIPATING EMPLOYEES AND INCLUDED AS TIPS WHEN PREPARING YOUR FORMS W-2 AND TAX STATEMENTS. THESE REPORTS ARE DUE TO THE IRS BY MARCH 31 OF THE FOLLOWING CALENDAR YEAR FOR EACH AND EVERY YEAR YOU PARTICIPATE IN THE TIP AGREEMENT. THE IRS MAY SEND YOU A LETTER EACH JANUARY TO REMIND YOU OF YOUR ANNUAL REQUIREMENTS. ALL REPORTS SHOULD BE SUBMITTED TO THE IRS VIA E-MAIL TO SBSE.TIP.COMPLIANCE@IRS.GOV. NOW, THAT WE'VE DISCUSSED WHAT REPORTS ARE DUE AT YEAR-END, LET'S TALK ABOUT HOW WE CAN WORK TOGETHER TO IMPROVE THE ACCURACY OF THE FORM 14439 EMPLOYEE DATA REPORT.

HOUSTON, WE HAVE A PROBLEM, I THINK, ALL OF US WHO HAVE WORKED ON THE YEAR-END REPORTS WOULD AGREE, RIGHT? SO WE DECIDED TO INCLUDE A PROBLEM STATEMENT FRONT END CENTER TO SOLVE A PROBLEM YOU MUST UNDERSTAND THE PROBLEM. REMEMBER, KNOWLEDGE IS POWER. SO DURING THIS PRESENTATION, WE WILL DEFINE WHAT THE PROBLEM OR PROBLEMS ARE, ACKNOWLEDGE THE ISSUES THAT NEED TO BE ADDRESSED, AND HOPEFULLY RESOLVE SOME OF THE ISSUES BY IMPROVING YOUR OVERALL UNDERSTANDING OF THE POINTS TO CONSIDER WHEN PREPARING THE YEAR-END REPORTS. EACH YEAR THE IRS RECEIVES A HIGH NUMBER OF ERRORS ON THE YEAR-END REPORTS. THIS TELLS US THAT WE NEED TO DO A BETTER JOB OF PROVIDING EDUCATION AND OUTREACH. IT'S IMPORTANT TO KNOW THAT THE YEAR-END REPORT IS MATCHED TO THE TIP RATES LISTED ON THE APPENDIX A FOR GITCA AND ATTACHMENT B FOR TRDA. THE APPENDIX A/ATTACHMENT B DOCUMENTS WERE PREPARED BY THE EMPLOYER DURING THE TIP AGREEMENT APPLICATION PROCESS. REMEMBER TO KEEP THIS DOCUMENT HANDY AT ALL TIME. IT SHOULD BE USED AS A GUIDE WHEN PREPARING THE FORM 14439, EMPLOYEE DATA REPORT. SO HOW DO WE USE THE FORM 14439? WE BEGIN WITH A MATCHING PROCESS. THE IRS MATCHES THE RATES LISTED ON THE APPENDIX A OR ATTACHMENT B OF YOUR TIP AGREEMENT TO THE OUTLETS, POSITION AND RATES LISTED ON THE TIME ATTENDANCE REPORT TO ENSURE THE CORRECT RATES HAVE BEEN APPLIED BY PAYROLL. THE IRS WILL THEN APPLY THE TIP RATES FROM YOUR TIP AGREEMENT TO FORM 14439 EMPLOYEE DATA REPORT BY OCCUPATION, OUTLET AND SHIFT TO ANALYZE AND GENERATE PROJECTED UNDERREPORTED TIPS FOR EACH EMPLOYEE. REMEMBER, THE TIPS REPORTED ON THIS REPORT SHOULD MATCH THE EMPLOYEE'S FORM W-2.

SO THE TIME PERIOD FOR THIS DATA SHOULD BE THE SAME AS THAT OF FORM W-2. FOR PURPOSES OF THIS WEBINAR DISCUSSION, WE WILL REFER IT TO AS A CALENDAR YEAR. THIS MATCHING PROCESS ALSO AIDS IN IDENTIFYING ERRORS OR WEAKNESSES IN THE EMPLOYER SYSTEM OR ADMINISTERING THE TIP AGREEMENT. FOR INSTANCE, ARE THERE TIP RATES FOR EVERY OCCUPATION, EVERY OUTLET, WERE HOURS TRACKED BY SHIFT WHEN APPROPRIATE, DID UPDATES THE RATES OCCUR FOR CHANGES SUCH AS NEW OUTLETS OR NEW POSITIONS DURING THE CALENDAR YEAR. REMEMBER, THAT NEW OUTLETS AND NEW POSITIONS REQUIRE CONTACTING THE IRS TO DETERMINE NEW RATES FOR THOSE POSITIONS, SHIFTS AND OUTLETS. IN ORDER TO REMAIN COMPLIANT WITH THE TIP AGREEMENT AND TO ENJOY THE TIP AUDIT PROTECTION, IT IS IMPORTANT THAT THE EMPLOYER ACCURATELY REPORTS TO THE IRS. THE IRS RELIES ON THE YEAR-END INFORMATION SUBMITTED TO IMPROVE OVERALL EMPLOYEE PARTICIPATION IN THE TIP AGREEMENT. TIP AGREEMENTS REQUIRE MINIMUM EMPLOYEE PARTICIPATION, THE IRS SENDS NOTICES TO EMPLOYEES WHO UNDER REPORT, THIS AIDS IN ENCOURAGING PARTICIPATION. IF THE REPORT CONTAINS INACCURATE INFORMATION, THE EMPLOYEES CATCH IT IMMEDIATELY WHEN THEY RECEIVED THE IRS NOTICE, AND BOTH THE IRS AND THE EMPLOYER HEAR ABOUT IT. INACCURACIES CAUSE HAVOC FOR BOTH THE IRS AND THE EMPLOYER, AND IF THE ISSUES WIDESPREAD CAN JEOPARDIZE THE TIP AGREEMENT. SO NOW THAT YOU HAVE A BETTER UNDERSTANDING OF HOW THE IRS USES THIS INFORMATION, YOU CAN SEE WHY THE ACCURACY OF THESE REPORTS IS SO IMPORTANT MAINTAINING THE CREDIBILITY AND INTEGRITY OF THE PROGRAM. THAT'S WHY WE MUST WORK TOGETHER TO IMPROVE ACCURACY AND MINIMIZE THE MISTAKES. WHEN ERRORS OCCUR, IT CAN DISRUPT YOUR BUSINESS, EMPLOYEES MAY LOSE CONFIDENCE IN THE INTEGRITY OF THE PROGRAM, DISCOURAGING FUTURE PARTICIPATION AND JEOPARDIZING THE MINIMUM PARTICIPATION REQUIREMENTS. OVERALL, IT CREATES ADDITIONAL WORK AND GRIEF BY ALL. SO DURING THIS WEBINAR SERIES, WE WILL SHARE SOME POINTS TO CONSIDER WHEN PREPARING AND FILING YOUR YEAR-END REPORT. SO NOW I'M GOING TO TURN IT OVER TO JENNIFER FOR INFORMATION ABOUT THE PARTICIPATION STATUS. JENNIFER CUNNINGHAM: THANK YOU, WALTER. SO LET'S START WITH THE EASY PART. HOW DOES THE PARTICIPATION STATUS OF YOUR EMPLOYEES AFFECT THIS REPORT? IF YOU HAVE MANDATORY PARTICIPATION, OR 100% OF YOUR EMPLOYEES PARTICIPATE FORM 14439 IS NOT REQUIRED. HOWEVER, YOU'RE STILL REQUIRED TO NOTIFY THE IRS THAT YOU HAVE MANDATORY OR 100% PARTICIPATION VIA E-MAIL TO SBSE.TIP.COMPLIANCE@IRS.GOV. SO ONCE CONSIDERED 100% PARTICIPATION, IT MEANS THAT ALL DIRECTLY AND INDIRECTLY TIPPED EMPLOYEES COVERED BY THE TIP AGREEMENT PARTICIPATED THE ENTIRE CALENDAR YEAR IT WAS AVAILABLE TO THEM. SPECIFICALLY, IT'S ALL TIPPED EMPLOYEES WITH AN HOURLY OR PERCENT OF SALES TIP RATE. THE EMPLOYER MUST BE APPLYING THE CORRECT TIP RATE TO EVERY OUTLET, SHIFT AND POSITION.

ALSO, THE PAYROLL AND TIME-AND-ATTENDANCE SYSTEM MUST BE ABLE TO TRACK AND APPLY THIS RATE WITH ACCURACY AND BE CONSISTENT WITH THE TERMS OF THE TIP AGREEMENT. IT SHOULD ALSO BE NOTED THAT PARTICIPANTS ALSO INCLUDE POSITIONS LISTED AS ACTUAL ON YOUR APPENDIX A AND ATTACHMENT B. THESE ARE TIPPED EMPLOYEES THAT OPERATE UNDER TIP RULES AND HAVE INTERNAL CONTROLS APPROVED BY THE IRS TO ENSURE ALL TIPS ARE REPORTED ACCURATELY. TO BE ON ACTUAL PROCEDURES MUST SECURELY TRACK THE TIP FROM THE TIME OF RECEIPT FROM A CUSTOMER TO THE RECORDING OF TIPS THROUGH PAYROLL. EVEN IF YOU DON'T HAVE 100% PARTICIPATION AND MUST FILE THE ANNUAL EMPLOYER REPORT, THERE'S STILL SOME GOOD NEWS. IN JANUARY OF EACH YEAR LETTER 4571 IS SENT TO EMPLOYERS PARTICIPATING IN THE TIP PROGRAM.

IT INCLUDES PUBLICATION 5060 EMPLOYEE DATA REPORT DISK THAT PROVIDES THE LATEST VERSION OF FORM 14439 IN BOTH PDF AND EXCEL FORMAT. PLEASE USE THE EXCEL FORMAT TO SUBMIT YOUR FORM 14439 AND REFER TO THIS DISK EACH YEAR TO ENSURE YOU HAVE THE MOST CURRENT EXCEL VERSION. PLEASE DO NOT USE PRIOR VERSIONS OR ATTEMPT TO CHANGE THIS FORMAT AS IT WILL RESULT IN YOUR YEAR-END REPORT BEING REJECTED. SECONDLY, YOU SHOULD ALWAYS REFER TO LETTER 4571 FOR GUIDANCE ON WHAT DATA MUST BE INCLUDED ON FORM 14439 AS THERE ARE 3 DIFFERENT VERSIONS: LETTER 4571-C IS FOR GITCA EMPLOYERS WHO ONLY NEED TO REPORT NON-PARTICIPANT EMPLOYEES ON THE FORM 14439 EMPLOYEE DATA REPORT AND SHOULD EXCLUDE PARTICIPATING EMPLOYEES AND THOSE ON ACTUAL; LETTER 4571-G IS SENT TO GITCA EMPLOYERS WHO MUST REPORT ALL TIPPED EMPLOYEES REGARDLESS OF PARTICIPATION STATUS; AND FINALLY, LETTER 4571-T IS SENT TO TRDA EMPLOYERS AND INCLUDES INSTRUCTIONS ON WHAT TO DO IF 100% OF YOUR EMPLOYEES PARTICIPATED THE ENTIRE CALENDAR YEAR. NOW TO DETERMINE IF YOUR PAYROLL SYSTEM IS CERTIFIED, GITCA EMPLOYERS SHOULD REFER TO APPENDIX E OF THEIR TIP AGREEMENT. IF THE MOST CURRENT APPENDIX E IS COUNTERSIGNED BY THE IRS, THEY ARE CONSIDERED CERTIFIED AND WILL RECEIVE LETTER 4571-C INSTRUCTING THEM TO ONLY INCLUDE NON-PARTICIPANTS ON THEIR FORM 14439. HOWEVER, IT SHOULD BE NOTED THAT CERTIFICATION STATUS CAN CHANGE. CERTIFICATION ON A FORMER TIP AGREEMENT DOES NOT GUARANTEE THAT IT WILL BE GRANTED ON A CURRENT TIP AGREEMENT AS INTERNAL CONTROLS ARE CHECKED EACH TIME A TIP AGREEMENT IS RENEWED. TO BE CERTIFIED, THE EMPLOYER MUST DEMONSTRATE STRONG INTERNAL CONTROLS WITH MONITORING, OVERSIGHT AND CROSS CHECKING TO DEMONSTRATE THE SYSTEMS CAN TRACK AND APPLY TIP RATES FOR EACH OUTLET, POSITION AND SHIFT. IF APPENDIX E IS NOT COUNTERSIGNED BY THE IRS, THEN THE EMPLOYER WILL RECEIVE LETTER 4571-G, WHICH REQUIRES THEM TO REPORT ALL TIPPED EMPLOYEES, BOTH PARTICIPATING AND NON-PARTICIPATING ON YOUR YEAR-END FORM 14439 REPORT. SO HERE'S A COPY OF THE FORM 14439 EMPLOYEE DATA REPORT. IT REQUIRES INFORMATION ON EACH EMPLOYEE, INCLUDING SOCIAL SECURITY NUMBER, OCCUPATION, OUTLET, TIPS WORKED, TOTAL HOURS WORKED, AND TOTAL TIPS REPORTED ON THE EMPLOYEE'S FORM W-2. THEN, WE HAVE SOME COLUMNS FOR TOTAL SALES, TOTAL CREDIT CARDS, TIPS, JACKPOT TOTALS AND ACTUAL TIPS THAT ARE COMPLETED IN SPECIAL CIRCUMSTANCES THAT WILL BE DISCUSSED LATER. IT SHOULD ALSO BE NOTED THAT IF AN EMPLOYEE WORKS MULTIPLE SHIFTS OR DIFFERENT POSITIONS OR OUTLETS, THEN YOU SHOULD COMPLETE A SEPARATE LINE FOR EACH DIFFERENT SHIFT, POSITION AND OUTLET.

THEREFORE, YOU MAY HAVE MULTIPLE LINES OF DATA FOR ONE EMPLOYEE. DUE TO THE IMPORTANCE OF ACCURATELY DETERMINING AN EMPLOYEE'S PARTICIPATION STATUS, I'D LIKE TO CLARIFY THE CRITERIA USED TO DETERMINE THE PARTICIPATION STATUS FOR NEW HIRES AND EXISTING EMPLOYEES. A NON-PARTICIPANT IS A NEWLY HIRED TIP EMPLOYEE WHO DOES NOT JOIN THE PROGRAM WITHIN 60 DAYS FROM THEIR DATE OF HIRE, OR WHO TIMELY JOINED, BUT FAILS TO PARTICIPATE IN THE PROGRAM FOR THE REMAINDER OF THE CALENDAR YEAR.

IT SHOULD ALSO BE NOTED THAT 60 DAYS FROM THE DATE OF HIRE IS THE MAXIMUM AMOUNT OF TIME A NEW HIRE HAS TO JOIN THE PROGRAM. HOWEVER, THE EMPLOYER HAS THE DISCRETION OF USING A SHORTER TIMEFRAME, SUCH AS 14 DAYS FROM DATE OF HIRE. SO NOW, LET'S TURN IT OVER TO TERRI FOR MORE INFORMATION ON THE NON-PARTICIPANT STATUS. TERRI VRABEL: THANK YOU, JENNIFER. SO HERE ARE SOME EXAMPLES OF NON-PARTICIPANTS. IN THE FIRST SCENARIO, THE EMPLOYEE WAS HIRED MARCH 5, BUT DID NOT JOIN THE PROGRAM UNTIL MAY 10. 60 DAYS FROM THEIR DATE OF HIRE IS MAY 4. SO THE EMPLOYEE CLEARLY FAILED TO JOIN BEFORE THE 60 DAY DEADLINE. REMEMBER, THE TIMEFRAME FOR NEW HIRES TO JOIN THE PROGRAM IS AT THE EMPLOYER'S DISCRETION AND CAN BE LESS THAN THE 60 DAYS, BUT THE MAXIMUM IS 60 DAYS. IN THE SECOND SCENARIO, THE NEW HIRE JOINED THE PROGRAM WITHIN THE 60-DAY TIMEFRAME, BUT FAILED TO PARTICIPATE FOR THE REMAINDER OF THE CALENDAR YEAR. THEREFORE, BOTH SCENARIOS RESULTS IN THE EMPLOYEE STATUS BEING LISTED AS NON-PARTICIPANT ON THE YEAR-END FORM 14439. HOWEVER, ON THE FLIP SIDE, HOW THE EMPLOYEE TIMELY JOINED AND PARTICIPATED EACH DAY OF THE CALENDAR YEAR UP TO A TERMINATION OR SEPARATION DATE, THEY WOULD BE CONSIDERED A PARTICIPANT ON THE YEAR-END REPORT. ANY EXISTING TIPPED EMPLOYEES IS A NON-PARTICIPANT, IF THEY FAIL TO PARTICIPATE THE ENTIRE CALENDAR YEAR THE PROGRAM IS AVAILABLE. FOR EXAMPLE, IF THEY DROPPED OUT OF THE PROGRAM ANYTIME DURING THE CALENDAR YEAR, THEY ARE CONSIDERED A NON-PARTICIPANT. ALSO, IF A NEW TIP AGREEMENT IS IMPLEMENTED LATER IN THE CALENDAR YEAR SUCH AS APRIL, AND THEY JOINED UNDER THE NEW AGREEMENT. IF AN EXISTING EMPLOYEE DID NOT PARTICIPATE IN JANUARY THROUGH MARCH UNDER THE OLD TIP AGREEMENT, THEY ARE CONSIDERED A NON-PARTICIPANT FOR THAT CALENDAR YEAR. THE GENERAL RULE IS IF AN EMPLOYEE IN A TIPPED POSITION DID NOT PARTICIPATE THE ENTIRE CALENDAR YEAR THE PROGRAM WAS AVAILABLE TO THEM, THEN THEY ARE CONSIDERED A NON-PARTICIPANT FOR PURPOSES OF THE YEAR-END REPORT. HOWEVER, REMEMBER WHEN PREPARING THE REPORT, YOU SHOULD INCLUDE ALL PAY PERIODS, USE TO PREPARE FORM W-2 AND NOT JUST THE PAY PERIOD, THE EMPLOYEE DID NOT PARTICIPATE INTO COMPLIANCE. FINALLY, IF AN EMPLOYEE DROPS OUT, THEY CANNOT REJOIN UNTIL JANUARY OF THE FOLLOWING YEAR. THIS SLIDE SUMMARIZES THE ANNUAL REPORTING BY TIP AGREEMENT TYPE. FOR THOSE WHO HAVE A TIP RATE DETERMINATION AGREEMENT, OR TRDA; OR A CERTIFIED GAMING INDUSTRY TIP COMPLIANCE AGREEMENT, GITCA. COMPLETE FORM 14439, IF YOU HAVE EMPLOYEES WHO DID NOT PARTICIPATE THE ENTIRE CALENDAR YEAR THAT THE PROGRAM WAS AVAILABLE.

THESE EMPLOYEES ARE CONSIDERED NON-PARTICIPATING EMPLOYEES. PLEASE DO NOT PROVIDE PARTICIPANT INFORMATION, AS THIS ONLY CREATES MORE WORK FOR YOU AND THE IRS. FOR THOSE WHO HAVE A NON-CERTIFIED GITCA REPORT EMPLOYEE DATA ON ALL TIPPED EMPLOYEES, INCLUDING THOSE LISTED AS ACTUAL ON YOUR APPENDIX A. YOU MAY HAVE A NON-CERTIFIED TIP, IF DURING THE PAYROLL CERTIFICATION PROCESS THE IRS DETERMINES THAT TIPS COULD NOT BE ACCURATELY TRACKED BY OUTLETS, OCCUPATION AND SHIFT.

AGAIN TO DETERMINE IF YOU'RE CERTIFIED OR NOT, PLEASE REFER TO THE APPENDIX E OF YOUR GITCA AGREEMENT TO SEE IF THIS IS BOTH MARKED CONCURS AND IS COUNTERSIGNED BY THE IRS PROGRAM MANAGER.

THESE ARE POINTS YOU MUST CONSIDER WHEN PREPARING THE FORM 14439. ALWAYS EXCLUDE ANY NON-TIP POSITION SUCH AS ADMINISTRATIVE STAFF OR BACK OF HOUSE UNLESS THEY ARE SHARING IN THE TIP POOL.

ALSO ALWAYS EXCLUDE ANY NON-TIP HOURS SUCH AS IF AN EMPLOYEE MOVES FROM A NON-TIP TO A TIPPED POSITION DURING THE YEAR, UNION TIME AND PERSONAL TIME OFF. THIS LIST ISN'T ALL INCLUSIVE, BUT IT IS TO PROVIDE YOU WITH EXAMPLES. YOU MUST INCLUDE HOURS FOR SETUP, BREAKDOWN, LUNCH AND BREAK, SINCE THESE HOURS WERE INCLUDED IN THE PAYROLL HOURS YOU PROVIDED TO CALCULATE THE TIP RATE. YOU MUST INCLUDE ALL HOURS WORKED AND TIPS REPORTED FOR THE CALENDAR YEAR, EVEN IF THE EMPLOYEE PARTICIPATED FOR A PORTION OF THE YEAR. IN OTHER WORDS, IF AN EMPLOYEE STARTS THE YEAR OUT AS A PARTICIPANT, BUT THEN DROP MID-YEAR, THEY ARE NOW A NON-PARTICIPANT FOR THE ENTIRE YEAR. SOME ADDITIONAL POINTS TO CONSIDER ARE SITUATIONS WHEN THERE ARE MULTIPLE LINES OF DATA FOR THE SAME EMPLOYEE, WHEN THERE ARE HOURLY TIP RATE FOR EACH SHIFT, AND AN EMPLOYEE WORKED MULTIPLE SHIFTS, THE REPORT SHOULD DOCUMENT THE EMPLOYEES' HOURS BY SHIFT. ANOTHER EXAMPLE IS IF AN EMPLOYEE CHANGED TIP POSITIONS OR VENUES DURING THE YEAR, AND/OR WORKED DIFFERENT SHIFTS, THE REPORT MUST LIST HOURS FOR EACH POSITION, EACH VENUE AND EACH SHIFT FOR THE EMPLOYEE. IF THE TIP RATE IS A PERCENTAGE OF SALES, WE DON'T NEED THE EMPLOYEE'S HOURS. HOWEVER, IF THE TIP RATE IS A PERCENTAGE OF SALES PLUS $1 PER HOUR. FOR EXAMPLE, 15% OF SALES PLUS $2.15 PER HOUR, YOU MUST PROVIDE THE HOURS AS WELL AS SALES. AGAIN, IF THE EMPLOYEE WORKED MULTIPLE POSITIONS, VENUES OR SHIFTS, WE NEED THE DATA SEGREGATED FOR EACH POSITION, OUTLET OR SHIFT. SO, LET'S LOOK AT AN EXAMPLE. IN THIS EXAMPLE, WE HAVE THE SAME EMPLOYEE WORKING 2 DIFFERENT OCCUPATIONS OR POSITION. JOHN SOMETIMES IS A SERVER AND SOMETIMES HE WORKS AS A BUS PERSON. JOHN ALSO WORKS DIFFERENT SHIFTS. THE REPORT CONTAINS 4 LINES FOR THE SAME EMPLOYEE TO SHOW THE HOURS WORKED EACH OCCUPATION AND, ON EACH SHIFT, BECAUSE THERE ARE DIFFERENT TIP RATES ON THE APPENDIX A OR ATTACHMENT B FOR EACH OCCUPATION BY SHIFT. SO WHY IS IT SO IMPORTANT TO SEGREGATE THE HOURS BY OCCUPATION, OUTLET AND SHIFT? BECAUSE ONCE WE REVIEW YOUR FORM 14439 EMPLOYEE DATA REPORT, A MATCHING PROCESS OCCURS TO CALCULATE PROJECTED UNDERREPORTED TIPS BY EMPLOYEE. THE TIP RATES LISTED ON YOUR APPENDIX A OR ATTACHMENT B AND/OR ANY SUBSEQUENT ADDENDA ARE MATCHED TO THE INFORMATION ON YOUR FORM 14439 EMPLOYEE DATA REPORT. THE TIP RATES ARE MATCHED BASED ON OCCUPATIONAL CATEGORY (POSITION), OUTLET (VENUE) AND SHIFT TO GENERATE PROJECTED TOTAL TIPS. THE PROJECTED TOTAL TIPS ARE THEN COMPARED TO THE TOTAL TIPS REPORTED ON YOUR FORM 14439 FOR EACH EMPLOYEE TO GENERATE PROJECTED UNDERREPORTED TIP.

REMEMBER THAT THE TIP AGREEMENT REQUIRES MINIMUM PARTICIPATION AND THE UNDERREPORTED TIP PROGRAM IS TO IMPROVE COMPLIANCE AND ENCOURAGE PARTICIPATION WITH THE TIP AGREEMENT. IN ADDITION, NEW OUTLETS OR POSITIONS DO NOT HAVE TIP AUDIT PROTECTION UNLESS THEY ARE REPORTED TIMELY TO THE IRS.

THAT'S WHY IT IS SO IMPERATIVE THAT THE DATA PROVIDED TO BE ACCURATE. FINALLY, I WANT TO POINT OUT IN THIS EXAMPLE THAT EVEN THOUGH YOU MUST SEGREGATE HOURS, YOU DO NOT HAVE TO SEGREGATE TIPS REPORTED BY POSITION OR SHIFT ONLY BY EMPLOYEE. TOTAL TIPS MUST RECONCILE TO THE EMPLOYEE'S FORM W-2. THEREFORE, THE PAY PERIOD USED TO PREPARE FORM 14439 SHOULD BE THE PAY PERIOD USED TO PREPARE THE FORM W-2 FOR THAT TAX YEAR. PLEASE CHECK THAT THE TIPS REPORTED ON FORM 14439 MATCH THE EMPLOYEE'S W-2 PRIOR TO SUBMISSION TO THE IRS. NOW, I'M GOING TO TURN IT OVER TO WALTER. WALTER BUDZINSKI: THANK YOU VERY MUCH, TERRI. SO LET'S START WITH THE DATA THAT IS REQUIRED. WE'VE MENTIONED SOME OF THIS ALREADY, BUT IT BEARS REPEATING. FIRST, YOU WANT TO MAKE SURE YOU'RE USING YOUR LATEST VERSION OF THE FORM 14439, WHICH INCLUDES BOTH A PDF AND EXCEL VERSION, IT IS IMPORTANT THAT YOU PROVIDE DATA ON THE VERSION THAT IS COMPATIBLE WITH OUR SYSTEMS. THIS WOULD BE THE EXCEL VERSION. I WOULD ALSO LIKE TO POINT OUT THAT THE IRS REQUIRES YOU USE THE SPECIFIC FORMAT THAT IS INCLUDED WITH THE ANNUAL PUBLICATION 5060, AND NOT A FORMAT THAT IS OBSOLETE OR FORMAT THAT YOU CREATED AND SENT TO THE IRS FOR SUBMISSION. REMEMBER, THIS INFORMATION GOES INTO A DATABASE, SO ANY DISCREPANCIES IN FORMAT MUST BE MANUALLY CORRECTED. WITH SEVERAL THOUSAND REPORTS, THIS REQUIRES ADDITIONAL TIME TO CORRECT AND MAY CREATE CONFUSION ON HOW THE DATA SHOULD BE USED. THE CURRENT FORMAT SENT WITH THE JANUARY LETTER IS THE ONE THAT MUST BE USED WITHOUT ANY MODIFICATION. SECONDLY, WHEN YOU PULL THE DATA FOR THE FORM 14439, YOU WANT TO MAKE CERTAIN THAT YOUR TIPS REPORTED RECONCILE TO THE EMPLOYEE'S W-2 TIPS. THIS MEANS THE SAME PAY PERIODS USED TO PREPARE THE EMPLOYEE W-2 SHOULD BE USED AS THE TIME FRAME FOR THIS REPORT, EVEN THOUGH IT IS REFERRED TO AS A CALENDAR YEAR. FOR EACH EMPLOYEE, YOU WILL ENTER THE EMPLOYEE'S NAME, LAST NAME COMMA FIRST NAME AND/OR MIDDLE INITIAL AND SOCIAL SECURITY NUMBER WITHOUT DASHES. THE COMPLETE SOCIAL SECURITY NUMBER MUST BE SUBMITTED NOT JUST THE LAST 4 DIGITS. ENTER EACH EMPLOYEE'S TIP PARTICIPATION STATUS. AS WE PREVIOUSLY DISCUSSED, PARTICIPANTS ARE NEWLY HIRED TIPPED EMPLOYEES WHO JOIN THE PROGRAM WITHIN THEIR DATE OF HIRE AND PARTICIPATES IN THE PROGRAM FOR THE REMAINDER OF THE CALENDAR YEAR. IF A NEW HIRE JOINS BUT DROPS OUT THEN THEY ARE A NON-PARTICIPANT AND SHOULD BE INCLUDED ON FORM 14439. EXISTING TIPPED EMPLOYEES ARE CONSIDERED PARTICIPANTS, IF THEY PARTICIPATE THE ENTIRE CALENDAR YEAR THE PROGRAM IS AVAILABLE TO THEM. FOR EXAMPLE, IF THEY DROPPED OUT OF THE PROGRAM ANYTIME DURING THE CALENDAR YEAR, THEY ARE CONSIDERED A NON-PARTICIPANT. IF AN EMPLOYEE IS CONSIDERED A NON-PARTICIPANT, YOU MUST INCLUDE ALL DATA RELATED TO THEIR TIPPED POSITION FOR THE ENTIRE CALENDAR YEAR ON FORM 14439 EVEN IF THEY PARTICIPATED FOR A PORTION OF THAT YEAR. A CALENDAR YEAR IS DEFINED AS THE TIME PAY PERIODS USED TO PREPARE THE FORM W-2 FOR THAT TAX YEAR.

THE PARTICIPATION STATUS MUST BE A Y FOR PARTICIPANTS OR AN N FOR NON-PARTICIPANTS. OTHER SYMBOLS SUCH AS 1 OR 0 ARE NOT ACCEPTABLE. OUTLET(S) WORKED, OCCUPATIONAL CATEGORY OR POSITIONS WORKED, SHIFT WORKED. ALL THREE OF THESE TITLES MUST MATCH EXACTLY TO THOSE LISTED ON YOUR APPENDIX A OR ATTACHMENT B. SO EVEN IF YOU HAVE AN OUTLET THAT ONLY WORKS SWING SHIFT, PLEASE ENTER THE APPROPRIATE SHIFT TITLE IN THAT COLUMN. DO NOT JUST LEAVE BLANK. IF YOU HAVE A BARTENDER LISTED ON THE APPENDIX A, LIST IT AS BARTENDER ON THE FORM 14439, DO NOT SHORTEN OR HYPHENATE THESE TITLES PLEASE. ALSO USE THE SAME ORDER. FOR INSTANCE, OAK LOUNGE ON APPENDIX A SHOULD NOT BE LOUNGE OAK ON FORM 14439. THESE MAY BE IMMATERIAL, BUT THE IRS AND OUR SYSTEMS DO NOT KNOW IF THE ITEMS ARE TRULY THE SAME. DETAILS MATTER HERE. TOTAL HOURS WORKED IN EACH APPLICABLE POSITION, SHIFT AND OUTLET. REMEMBER, AN EMPLOYEE MAY HAVE MULTIPLE LINES OF DATA IF THEY WORK MULTIPLE POSITIONS, MULTIPLE OUTLETS OR MULTIPLE SHIFTS. SALES BY EMPLOYEE, THIS COLUMN HAS COMPLETED FOR POSITIONS WHERE TIP RATES ARE BASED ON THE PERCENT OF SALES ONLY. AND TOTAL TIPS REPORTED ON W-2 MUCH MATCH THE EMPLOYEE'S TIPS REPORTED IN BOX 7 OF FORM W-2 BUT EXCLUDES ALLOCATED TIPS ON BOX 8. NEXT, WE WILL DISCUSS SOME COLUMNS THAT MAY OR MAY NOT BE APPLICABLE TO YOUR TIP AGREEMENT. A FEW OF OUR EMPLOYERS HAVE UNIQUE TIPPED POSITIONS WHERE THE TIP POOL IS COMPOSED OF TIPS REPORTED DIRECTLY TO PAYROLL PLUS AN HOURLY TIP RATE. THUS, WE HAVE ADDED COLUMNS FOR CREDIT CARD TIPS, TIPS THAT ARE POOLED AND SPLIT, WHICH WE CALL ACTUAL AND JACKPOTS. IF YOU ARE ONE OF THESE EMPLOYERS, YOUR APPENDIX A OR ATTACHMENT B WILL HAVE A RATE THAT IS LISTED AS CC PLUS $1 PER HOUR OR PERCENTAGE OF SALES, ACTUAL PLUS $1 PER HOUR OR PERCENTAGE OF SALES, OR JACKPOT OR JKP PLUS $1 PER HOUR. SO WHEN WOULD YOU USE THESE COLUMNS? LET'S BEGIN WITH THE CREDIT CARD TIPS. IF YOU HAVE SERVERS AT THE STEAKHOUSE WHO DECIDE TO REPORT ALL THEIR CREDIT CARD TIPS DIRECTLY TO PAYROLL, THEIR HOURLY TIP RATE WOULD EXCLUDE ANY CHARGE TIPS AND WOULD BASICALLY BE COMPRISED OF TIPS FROM THEIR CASH SALES.

IF THIS ARRANGEMENT APPLIES TO ONE OF YOUR POSITIONS, THE TIP RATE ON THE APPENDIX A OR ATTACHMENT B WOULD BE LISTED AS CC PLUS $1 AMOUNT PER HOUR OR PERCENTAGE OF SALES. YOU WOULD USE THE ACTUAL COLUMN FOR POSITIONS WHERE THE EMPLOYEE MAY BE WORKING IN A POSITION THAT POOLS AND SPLITS THEIR TIPS BUT ARE ALSO RECEIVING TIPS FROM OTHER EMPLOYEES BASED ON $1 PER HOUR. THE POOL OF MONEY WOULD BE REPORTED DIRECTLY TO PAYROLL, THE RATE WOULD BE LISTED AS ACTUAL PLUS $1 AMOUNT PER HOUR OR PERCENTAGE OF SALES. ANOTHER EXAMPLE WOULD BE IF A TIPPED EMPLOYEE WORKED PART OF THE YEAR IN A POSITION WITH AN HOURLY TIP RATE, BUT THEN TRANSFER TO A POSITION THAT HAS A TIP RATE OF ACTUAL. AND, FINALLY, THE JACKPOT COLUMN IS USED IF YOU HAVE A GITCA WITH A TIP RATE OF JACKPOT PLUS $1 AMOUNT PER HOUR. THIS SITUATION WOULD BE SIMILAR TO ACTUAL TIPS EXCEPT THE COMPONENT REPORTED DIRECTLY TO PAYROLL WOULD BE JACKPOTS OR LISTED AS JKP. HOWEVER, BEFORE YOU GET STRESSED OUT ABOUT GATHERING THE DATA FOR THESE COLUMNS LOOK AT YOUR APPENDIX A OR ATTACHMENT B. IF YOU DON'T SEE ANY OF THESE TIP RATES LISTED WITH A PLUS DOLLAR PER HOUR OR PLUS PERCENTAGE OF SALES, DISREGARD THESE COLUMNS, JUST LEAVE THEM BLANK BECAUSE THEY DON'T APPLY TO YOU. IF YOU'RE NOT SURE, CONTACT YOUR TIP COORDINATOR. AND NOW, JENNIFER WILL DISCUSS THE MATCHING PROCESS. JENNIFER CUNNINGHAM: THANK YOU, WALTER. SO WALTER TALKED ABOUT HOW WE USE THE REPORTS TO GENERATE PROJECTED UNDERREPORTED TIPS. NOW, I'D LIKE TO TALK WITH YOU ABOUT HOW THE PROCESS ACTUALLY WORKS. ONCE WE RECEIVE YOUR FORM 14439 EMPLOYEE DATA REPORT, IT IS COMPARED TO THE APPENDIX A OR ATTACHMENT B ASSOCIATED WITH YOUR AGREEMENT, INCLUDING ANY ADDENDA TO ENSURE THE POSITION TITLES, OUTLET TITLES AND SHIFT TITLES MATCH. IF THERE ARE DISCREPANCIES, THE REPORT WILL BE RETURNED TO YOU TO MAKE THE NECESSARY CORRECTIONS. AND WHY IS THIS SO IMPORTANT THAT THEY MATCH EXACTLY. THAT'S BECAUSE THE MATCHING PROCESS THAT GENERATES THE POTENTIAL UNDERREPORTED TIPS IS PERFORMED BY A DATABASE.

HERE'S HOW THE PROCESS WORKS. YOUR FORM 14439 IS UPLOADED TO THE IRS DATABASE. IN ADDITION, WE UPLOADED THE APPENDIX A OR ATTACHMENT B AND ANY ADDENDA FOR YOUR PROPERTY FROM THE EFFECTIVE DATE OF YOUR CURRENT AGREEMENT TO THAT SAME DATABASE. THE DATABASE THEN AUTOMATICALLY MATCHES THE TIP RATE TO THE HOURS FOR EACH POSITION, OUTLET AND SHIFT TITLE TO GENERATE THE PROJECTED UNDERREPORTED TIPS. AND THIS SOUNDS SIMPLE DOES IT? WELL, TRUST ME IT'S NOT. THAT'S WHY WE'RE PROVIDING THIS DETAILED GUIDANCE TODAY FOR YOUR REFERENCE. IF YOU'VE EVER WORKED WITH A DATABASE, YOU KNOW THAT ONE SPACE, ONE TYPO, ANYTHING THAT DOES NOT MATCH EXACTLY CREATES AN ERROR. SO, IF ANY OF THE POSITION, OUTLET OR SHIFT TITLES ARE OFF BY ONE SPACE OR JUST ONE DASH, IT CREATES AN ERROR CODE OR A REJECT. AND EACH ERROR CODE MUST BE MANUALLY CORRECTED OR THE DATABASE WILL NOT UPLOAD THE REPORTS. THAT ALSO MEANS IT CANNOT PERFORM THE MATCHING PROCESS TO GENERATE THE CORRECT POTENTIAL UNDERREPORTED TIPS. IF THE INFORMATION IS NOT CORRECT, IT CAN RESULT IN GREATER UNDERREPORTED TIP INCOME AND HIGHER TAX LIABILITY FOR THE EMPLOYEE. AND AGAIN, THIS SOUNDS SIMPLE, CORRECT THE SPACE AND MOVE ON. HOWEVER, I'VE LITERALLY SEEN ONE EXTRA SPACE TURN INTO 50 ERROR CODES, BECAUSE THE SAME TITLE APPLIES TO MULTIPLE EMPLOYEES. SO BEFORE THE REPORT CAN BE UPLOADED, EACH ERROR CODE MUST BE REVIEWED TO DETERMINE WHAT THE PROBLEM IS, AND THEN EACH ONE MUST BE MANUALLY CORRECTED ON THE FORM 14439. THAT'S WHY WE'RE DOING THIS WEBINAR. TO SHARE WITH YOU THE TOOLS AND THE KNOWLEDGE TO SUBMIT REPORTS CORRECTLY THE FIRST TIME. WHILE WE FOCUSED ON THE UNDERREPORTING AND ITS IMPACT TO EMPLOYEES, IT'S EQUALLY IMPORTANT TO REMEMBER THAT YEAR-END REPORTS DEMONSTRATE THE EMPLOYERS OVERALL COMPLIANCE WITH THEIR TIP AGREEMENT. UNDER A TIP AGREEMENT, EMPLOYERS ARE REQUIRED TO DEMONSTRATE TIP REPORTING COMPLIANCE IN EXCHANGE FOR TIP AUDIT PROTECTION. IF THE YEAR-END REPORTS ARE INCORRECT, IT RAISES QUESTIONS ABOUT THE EMPLOYER'S ABILITY TO TRACK AND REPORT TIPS CORRECTLY OR TO MEET THEIR MINIMUM REQUIRED PARTICIPATION, AND EVEN IF THEY ARE EDUCATING THEIR EMPLOYEES ON TIP REPORTING. ACCURATE YEAR-END REPORTS DEMONSTRATE THE EMPLOYER'S COMPLIANCE WITH THESE IMPORTANT REQUIREMENTS, WHEREAS INACCURATE REPORTS CAN JEOPARDIZE THEIR TIP AGREEMENT. I'M SURE YOU UNDERSTAND THAT WITH SEVERAL THOUSAND OF THESE REPORTS, THE IRS CANNOT CORRECT THEM ALL. SO, REMEMBER IF CORRECTIONS ARE REQUIRED, WE WILL RETURN THE REPORT TO YOU TO BE CORRECTED AND RESUBMITTED. ANOTHER HELPFUL HINT TO ENSURE THERE IS A WRITTEN PROCESS AVAILABLE TO THOSE EMPLOYEES WHO PREPARE THE YEAR-END REPORTS. EACH YEAR THE IRS RECEIVES INCORRECT SUBMISSIONS, BECAUSE THE PERSON SUBMITTING THE REPORTS ARE IS NEW, AND HAS NO EXPERIENCE IN PREPARING THEM. SO PLEASE ESTABLISH A PROCESS TO SHARE AND PROVIDE ACCESS TO THIS INFORMATION WITH OTHERS IN YOUR ORGANIZATION, IN CASE SOMEONE NEW MUST PREPARE THEIR REPORTS NEXT YEAR. SO NOW LET'S LOOK AT AN EXAMPLE OF ISSUES THAT CREATE AN ERROR OR REJECT CODE. NOW, HERE IS AN EXAMPLE OF THE WAY THE TITLES ARE LISTED ON THE APPENDIX A OR ATTACHMENT B. THE POSITION TITLE IS BUS PERSON WORKING AT THE OUTLET TITLE PIN OAK PUB, ON THE SHIFT TITLE DAY, D-A-Y. THIS IS HOW THEY SHOULD BE LISTED ON YOUR YEAR-END FORM 14439. HOWEVER, IF YOU LOOK AT THE FORM 14439, IT LISTS THE BUSSER WORKING AT THE PIN OAK PUB ON SHIFT 2. SO THIS LINE OF DATA HAS 2 ERRORS, AN INCORRECT POSITION TITLE AND AN INCORRECT SHIFT TITLE. THE SECOND LINE LIST AN INCORRECT POSITION TITLE OF BUS PERSON 1. AND FINALLY, THE THIRD LINE LIST, THE BUS PERSON TITLE CORRECTLY, BUT LEAVES OUT A SPACE IN THE OUTLET TITLE BETWEEN PIN AND OAK. THESE ARE EXAMPLES OF WHAT THE DATABASE CONSIDERS A MISMATCH AND EXAMPLES OF WHAT WE SEE ALL THE TIME. SO, LOOKING AT THIS, YOU AND I BOTH KNOW THAT A BUS PERSON AND BUSSER, MAY BE THE SAME POSITION. HOWEVER, THE DATABASE DOESN'T KNOW, SO IT IDENTIFIES IT AS AN ERROR CODE. IT IS A MISMATCH. IT CAN ONLY MATCH EXACT WORDS OR GROUPS OF WORDS, SUCH AS BUS PERSON. THEREFORE, IT'S VITALLY IMPORTANT TO ENSURE THE POSITION, OUTLET AND SHIFT TITLES MATCH EXACTLY. THE REASON THIS CAN HAPPEN IS THAT WHEN THE FORM 14439 IS COMPLETED, IT IS SORTED ALPHABETICALLY BY EMPLOYEE NAME. SO THE POSITION LISTED AS BUSSER MAY HAVE THE LAST NAME BEGINNING IN A, THE POSITION LISTED AS BUS PERSON 1, MAY HAVE THE LAST NAME BEGINNING IN O, AND THE POSITION LISTED AS BUS PERSON, BUT WITH A TYPO IN THE OUTLET NAME COULD HAVE THE LAST NAME BEGINNING WITHIN S, AND THERE COULD BE HUNDREDS OF LINES OF DATA BETWEEN THESE 3 EMPLOYEES. THAT MAKES IT IMPOSSIBLE TO REVIEW THIS REPORT AND PHYSICALLY SEE DISCREPANCIES IN TITLES MUCH LESS THAN SPACING. HOWEVER, THERE'S A SIMPLE SOLUTION. BEFORE YOU SUBMIT YOUR FINAL REPORT, SORT THE DATA A COUPLE OF DIFFERENT WAYS. THIS IS OUR NEXT BEST TIP FOR ENSURING ACCURATE YEAR-END REPORT. FIRST, PERFORM A DATA SORT TO GROUP THE EMPLOYEES BY OUTLET SO THAT YOU CAN EASILY SEE DISCREPANCIES IN TITLES, EVEN EXTRA SPACES. SO THIS SORT WILL BE A 3 LEVEL SORT WITH LEVEL ONE AS OUTLET, LEVEL TWO IS POSITION AND LEVEL 3 AS SHIFT. BY GROUPING THE DATA BY OUTLET, IT WILL MAKE IT EASIER TO COMPARE EACH OUTLET TO THE TITLES LISTED ON YOUR APPENDIX A OR ATTACHMENT B, AND ADDENDA TO ENSURE THEY MATCH AND IT WILL ALSO ALLOW YOU TO SEE ANY DISCREPANCIES IN SPACING OR TYPOS. BY PERFORMING THIS DATA SORT, YOUR DATA WILL NOW LOOK SIMILAR TO THE EXAMPLE.

AND AS YOU CAN SEE, IN JUST 3 LINES OF DATA, WE HAVE 4 ERRORS WHERE THE TITLES DO NOT MATCH. BUT BECAUSE THEY ARE GROUPED IN THE SAME OUTLET, THEY ARE NOW EASIER TO FIND AND TO CORRECT. IT ALSO MAKES IT MUCH EASIER TO SEE A POSITION IN THE OUTLET THAT DOESN'T BELONG OR HAVE A TIP RATE. NOW THAT WE HAVE TITLES CONSISTENT WITH THE APPENDIX A OR ATTACHMENT B, IF YOU'RE REQUIRED TO SUBMIT ALL TIPPED EMPLOYEES PERFORM A SECOND SORT TO MAKE SURE THERE ARE NOT ANY EMPLOYEES LISTED AS PARTICIPANTS WHO HAVE ZERO OR LOW TIPS REPORTED ON THE FORM W-2 TIPS COLUMN. FIRST, SORT THE FORM 14439 BY PARTICIPATION STATUS, THIS WILL GROUP EMPLOYEES INTO PARTICIPANTS AND NON-PARTICIPANTS.

THEN REVIEW THE PARTICIPANTS TO SEE IF THEY HAVE MINIMAL OR ZERO TIPS REPORTED AND COMPARE THAT TO THEIR HOURS. IF YOUR REPORT IS SHOWING EMPLOYEES AS A PARTICIPANT WITH LOW TIPS REPORTED, THEN YOU NEED TO DETERMINE IF THEIR STATUS IS ACCURATE. ARE THEY A NEW HIRE WHO WORKED MOST OF THEIR HOURS DURING THE FIRST 60 DAYS, OR HAVE THEY WORKED SEVERAL 100 HOURS BUT HAVE NO OR MINIMAL TIPS REPORTED. IF IT'S THE LATTER, YOU NEED TO CHANGE THEIR PARTICIPATION STATUS TO N AND CHECK YOUR SYSTEM TO SEE WHY IT HAD THEIR STATUS AS PARTICIPANT. ON THE FLIP SIDE, IF YOU ARE ONLY REQUIRED TO REPORT NON-PARTICIPANTS, SPOT CHECK THOSE EMPLOYEES LISTED AS PARTICIPANTS AS WELL TO ENSURE THEIR PARTICIPATION STATUS IS LISTED ACCURATELY. IF AN EMPLOYEE DID NOT REPORT ALL THE TIPS AT THE TIP RATE, THEN LIST THIS THEM AS A NON-PARTICIPANT AND ADD THEM TO FORM 14439. AND FINALLY, REMEMBER, IF AN EMPLOYEE DOES NOT PARTICIPATE THE ENTIRE CALENDAR YEAR, THE PROGRAM IS AVAILABLE, THEY ARE A NON-PARTICIPANT ON THIS REPORT. I CAN'T STRESS ENOUGH HOW IMPORTANT IT IS TO REVIEW YOUR REPORT EVEN MINOR ERRORS SUCH AS NO SPACE BEFORE A DASH MUST BE CORRECTED BEFORE THE DATABASE WILL ACCEPT THE DOCUMENTS AND GENERATE THE PROJECTED UNDERREPORTED TIPS. BUT REMEMBER, ONCE YOU FINISH YOUR REVIEW, DON'T FORGET TO RESORT YOUR EMPLOYEE DATA REPORT BY EMPLOYEE NAME BEFORE SUBMITTING IT TO THE IRS. AND SO NEXT, TERRI IS GOING TO TALK ABOUT SOME OF THE ERRORS THAT WE SEE. TERRI VRABEL: OKAY, JENNIFER. THANK YOU. SO NOW THAT WE'VE DISCUSSED THE DISCREPANCIES IN THE TITLES, LET'S TALK ABOUT SOME OF THE OTHER ERRORS THAT WE SEE ON THE REPORTS. SOME OF THEM MAY NOT BE APPLICABLE TO YOU. BUT BY SHARING THIS INFORMATION, WE HOPE TO IMPROVE THE OVERALL ACCURACY OF THE YEAR-END REPORT, AS WELL AS THE OVERALL APPLICATION OF THE TIP RATES BY PAYROLL THROUGHOUT THE YEAR. SO, FIRST, WE HAVE POSITIONS, OUTLET AND/OR SHIFTS LISTED ON THE ANNUAL REPORT THAT ARE NOT LISTED ON YOUR AGREEMENT OR VICE VERSA. IF AN OUTLET NAME IS CHANGED, OR A NEW OUTLET OPENS, CREATING OR ELIMINATING TIPPED POSITIONS, CONTACT YOUR TIP COORDINATOR TO UPDATE YOUR TIP AGREEMENT. NEXT, THE REPORT LISTS ZERO HOURS FOR EMPLOYEES WITH HOURLY TIP RATE. FOR EXAMPLE, WE OFTEN SEE TIPS REPORTED ON ONE LINE, BUT THE HOURS ARE REPORTED ON ANOTHER LINE. SO PLEASE MERGE THOSE TWO LINES OF DATA INTO ONE BEFORE YOU SUBMIT YOUR REPORT. ZERO TIPS ARE REPORTED FOR EMPLOYEES WITH ACTUAL AND CREDIT CARDS TIP RATES OR FOR EMPLOYEES WHO WERE SHOWN AS PARTICIPANTS ON THE REPORT, WHY WOULD THIS SEEM UNUSUAL TO US? WELL, BECAUSE WHEN A TIP RATE IS LISTED AS ACTUAL OR CC PLUS A $1 PER HOUR, THAT MEANS THAT A PORTION OF THEIR TIP POOL IS REPORTED DIRECTLY TO PAYROLL AND SHOULD BE REFLECTED ON THEIR FORM W-2. AND SINCE THE TOTAL TIPS ON THE EMPLOYEE DATA REPORT INCLUDES TIPS REPORTED DIRECTLY TO PAYROLL. HOW COULD THEY HAVE ZERO TIPS? HOW COULD AN EMPLOYEE TO BE CONSIDERED A PARTICIPANT WHEN THEY REPORTED ZERO TIPS? REMEMBER, IF AN EMPLOYEE IS A PARTICIPANT, THEIR EMPLOYER WILL AUTOMATICALLY APPLY THE PARTICIPANT RATE TO EVERY HOUR DURING THEIR SHIFT IN A TIPPED POSITION. INVESTIGATE THESE SITUATIONS FURTHER. DID THIS EMPLOYEE REALLY SIGN UP FOR PARTICIPATION? DID THIS EMPLOYEE WORK IN A NON-TIPPED POSITION BUT IT WAS CODED AS A TIPPED EMPLOYEE ON THE REPORT? THERE ARE SOME OTHER COMMON ERRORS TO AVOID.

EMPLOYEE HOURS ARE NOT BROKEN OUT BY DIFFERENT POSITIONS, OUTLETS OR SHIFTS. EVEN THOUGH THERE ARE DIFFERENT TIP RATES. IT IS OKAY TO HAVE MULTIPLE LINES OF DATA. A COMMON ERROR THAT WE SEE ON THE YEAR-END REPORT IS ONE LINE OF DATA FOR EACH EMPLOYEE. IF AN EMPLOYEE WORKS DIFFERENT SHIFTS THAT HAVE DIFFERENT TIP RATES, THEN THAT EMPLOYEE'S HOURS SHOULD BE BROKEN DOWN BY SHIFT, WHICH MEANS THERE WOULD BE MORE THAN ONE LINE OF DATA ON THE YEAR-END REPORT. IF THE EMPLOYEE MOVED FROM ONE POSITION TO A SECOND POSITION, THAT WOULD CREATE A SEPARATE LINE OF DATA. THE REASON THIS IS A CRITICAL ERROR IS THAT THE HOURS BY SHIFTS ARE USED TO DETERMINE THE POTENTIAL UNDERREPORTED TIPS FOR THE NON-PARTICIPATING EMPLOYEE. IF THE HOURS ASSIGNED TO THE SHIFT ARE INACCURATE, THEN THE POTENTIAL TIP INCOME WILL ALSO BE WRONG. EMPLOYEES LISTED IN OUTLETS THAT HAVE A TIP RATE OF ACTUAL ARE LISTED AS A NON-PARTICIPANT ON THE YEAR-END REPORT, SUCH AS TABLE DEALERS. POSITIONS ON ACTUAL ARE ALWAYS PARTICIPANTS, WHEN A TIP RATE IS LISTED AS ACTUAL THAT MEANS THAT THE IRS HAS APPROVED INTERNAL CONTROLS TO ENSURE THAT 100% OF THEIR TIPS ARE REPORTED TO PAYROLL AND UNDER THE TIP PROGRAM. THEY ARE AUTOMATICALLY CONSIDERED PARTICIPANTS. AS A SECOND CHECK, REFER TO YOUR LETTER 4571 TO DETERMINE THE REQUIREMENTS. TO REPORT ALL TIPPED EMPLOYEES OR ONLY NON-PARTICIPANT EMPLOYEES ON FORM 14439. IF ONLY NON-PARTICIPANTS ARE REQUIRED, THEN THE POSITIONS LISTED AS ACTUAL ON YOUR APPENDIX A SHOULD BE EXCLUDED FROM THE YEAR-END REPORT. AND HERE'S THE LAST COUPLE OF COMMON ERRORS TO DISCUSS. THE SHIFTS ARE LISTED ON THE APPENDIX A OR ATTACHMENT B AS ALL, BUT LISTED ON THE ANNUAL REPORT AS 1, 2, 3, OR D, G, S OR GRAVE, DAY, SWING OR VICE VERSA. MANY TIMES, WHEN THERE IS ONE TIP RATE FOR ALL SHIFTS, INSTEAD OF ENTERING A RATE FOR EACH SHIFT, WE WILL SEE ALL ON EITHER THE APPENDIX A OR YEAR-END REPORT. AGAIN, THE DATABASE CAN ONLY MATCH EXACT WORDS.

SO PLEASE MAKE SURE YOUR SHIFT TITLES ARE CONSISTENT WITH YOUR APPENDIX A OR ATTACHMENT B. THE ANNUAL REPORT LIST HOURS IN A SHIFT THAT HAS NO HOURLY TIP RATE ON THE APPENDIX A OR ATTACHMENT B.

AN EXAMPLE WOULD BE THE AGREEMENT ONLY LIST RATES FOR SWING SHIFTS. BUT EMPLOYEE CLOCKS IN EARLY AND HOURS ARE RECORDED UNDER DAY OR AN EMPLOYEE WORKS LATE AND HOURS ARE RECORDED UNDER THE GRAVE SHIFT. SO EVEN IF THE OUTLET IS ONLY OPEN DURING SWING SHIFTS, YOU SHOULD STILL ENTER THE SAME TIP RATE IN YOUR SYSTEM FOR ALL THREE SHIFTS TO ENSURE THE TIP RATE IS APPLIED TO THOSE HOURS FOR PARTICIPATING EMPLOYEE. NOW, I'D LIKE TO TURN THE PAGE FROM DISCUSSING COMMON ERRORS AND ADDRESS SOME ADDITIONAL POINTS YOU SHOULD CONSIDER IN PREPARING YOUR YEAR-END REPORT. TIP FIELD SHOULD NOT INCLUDE ANY AMOUNT TREATED AS WAGES. TOTAL TIPS REPORTED ON THE YEAR-END REPORT SHOULD EXCLUDE AUTO GRATUITIES AND SERVICE CHARGES. SERVICE CHARGES ARE AMOUNTS DETERMINED BY THE OUTLET NOT THE CUSTOMER, SUCH AS 20% FOR PARTIES OF SIX OR MORE. FOR REVENUE RULING 2012-18 ANY AUTO GRATUITIES OR SERVICE CHARGES IMPOSED BY THE EMPLOYER AND DISTRIBUTED TO THE EMPLOYEES MUST BE TREATED AS WAGES, BECAUSE THEY ARE A WAGE, THEY SHOULD NOT BE INCLUDED IN THE TOTAL TIPS COLUMN. TIP FIELD SHOULD NOT INCLUDE ALLOCATED TIP LISTED IN BOX 8 OF W-2. EVEN IF THERE ARE ALLOCATED TIPS IN BOX 8, A FORM W-2 FOR AN EMPLOYEE THE AMOUNT SHOULD NOT BE INCLUDED IN TOTAL TIP ON THE YEAR-END REPORT.

ALLOCATED TIPS HAVE NOT BEEN REPORTED OR TAXED. SO THEY SHOULD NOT BE INCLUDED IN THE TOTAL TIPS COLUMN. REMEMBER, TOTAL TISP SHOULD EQUAL THE TIPS REPORTED ON THE EMPLOYEE'S W-2. THE APPENDIX A OR ATTACHMENT B HAS BEEN UPDATED FOR A NEW OUTLET NAME, BUT THE OLD ONE IS LISTED ON THE ANNUAL REPORT. SO I WANT TO MAKE TWO POINTS HERE. FIRST, WHEN WE UPDATE YOUR TIP AGREEMENT FOR THE NEW OUTLET OR NEW POSITIONS, PLEASE MAKE SURE THAT THE IRS IS USING THE TITLES LISTED IN YOUR SYSTEM THAT IS USED TO PREPARE THE YEAR-END REPORT AS THE TITLES ON THE NEW APPENDIX A AND ATTACHMENT B.

EACH YEAR, PLEASE MAKE SURE THAT THE SYSTEM USED TO PREPARE THE YEAR-END REPORT HAS BEEN MATCHED AGAINST YOUR APPENDIX A OR ATTACHMENT BS AND MAKE ANY NECESSARY UPDATES BEFORE PULLING THE DATA FOR THE YEAR-END REPORT. THIS WILL MAKE ALL OF OUR LIVES EASIER. NOW THAT WE'VE DISCUSSED SOME OF THE COMMON ERRORS THAT OCCUR DURING THE MATCHING PROCESS. LET'S TALK ABOUT HOW THESE DISCREPANCIES OCCUR AND HOW WE CAN WORK TOGETHER TO IMPROVE THE ACCURACY. KEEP YOUR TITLES CURRENT. IF YOU ADD A NEW OCCUPATION OR OUTLET, MAKE SURE TO UPDATE THE TITLES IN THE SYSTEM USED TO PREPARE THE EMPLOYEE DATA REPORT AND MAKE SURE YOUR PAYROLL SYSTEM IS UPDATED AS WELL. THAT'S PRETTY STRAIGHTFORWARD. KEEP YOUR AGREEMENT UP TO DATE, WHEN YOU MAKE CHANGES OR ADDITIONS FOR NEW OUTLETS, POSITIONS OR EVEN IMPLEMENTED NEW PAYROLL SYSTEM WITH NEW TITLES, CONTACT THE TIP COORDINATOR OR THE NTRC ANALYSTS TO ENSURE THESE CHANGES ARE PROPERLY REFLECTED ON THE APPENDIX A FOR YOUR PROPERTY. IF YOU ADD A BEVERAGE SERVER POSITION IN THE BAR, OR YOU DECIDE TO ELIMINATE THE BUSSER AT AN OUTLET, CONTACT YOUR TIP COORDINATOR OR NTRC ANALYST FOR ANY CHANGES, BECAUSE THAT AFFECTS THE DISTRIBUTION OF THE TIP POOL AND CAN LEAD TO PROBLEMS WITH EMPLOYEE PARTICIPATION. PLEASE DO NOT WAIT OR DELAY. MAKE SURE THE TIPS AND HOURS ARE ACCURATE. IF THIS IS YOUR FIRST YEAR OF THE TIP PROGRAM, ONLY USE THE HOURS FROM THE EFFECTIVE DATE THROUGH THE LAST PAY PERIOD INCLUDED ON THE EMPLOYEE'S FORM W-2 OR YOUR YEAR-END REPORT. IF THIS IS A SUBSEQUENT YEAR, PULL THE DATA FOR THE SAME TIME PERIOD OR PAY PERIODS AS YOUR W-2. IF AN EMPLOYEE CHANGES FROM A NON-TIPPED POSITION TO TIPPED POSITION DURING THE YEAR, ONLY INCLUDE THE TIPPED HOURS. AND REMEMBER, PAY TIME OFF, SICK, ADMIN, MEETING, TRADING UNION AND OTHER NON-TIPPABLE HOURS SHOULD NOT BE INCLUDED IN THE TOTAL HOURS OF WORKED. ANOTHER GOOD PRACTICE IS TO REFER TO LETTER 4571 FOR GUIDELINES TO SUBMIT THE YEAR-END REPORT, EXPLANATIONS OF THE DATA REQUIRED AND FOR THE MOST PART FORMAT, BECAUSE WE ARE CONSTANTLY TRYING TO MAKE THIS PROGRAM MORE EFFICIENT, YOU SHOULD ALWAYS REVIEW THIS LETTER AND THE CD. IT INCLUDES THE MOST CURRENT FORM 14439 AND IT'S IN THE EXCEL FORMAT THAT IS COMPATIBLE WITH THE IRS DATABASE. AND FINALLY, REMEMBER TO SEND A COPY OF YOUR TIME AND ATTENDANCE SYSTEM/PAYROLL REPORT TO THE IRS WHEN SUBMITTING YOUR ANNUAL EMPLOYEE REPORT. FOR ADDITIONAL INFORMATION ON THIS REPORT, PLEASE REFER TO THE WEBINAR SERIES ON EMPLOYER-COMPUTED TIP REPORTING PROCESS CERTIFICATION, ALSO COMMONLY REFERRED TO AS PAYROLL CERTIFICATION. NOW, JENNIFER IS GOING TO SPEAK ABOUT THE VALIDATION PROCESS. JENNIFER CUNNINGHAM: THANK YOU, TERRI. SO, ONCE WE'VE RECEIVED YOUR YEAR-END REPORT PACKAGE, ALL THE CORRECTIONS ARE MADE AND WE'VE UPLOADED IT TO OUR DATABASE TO GENERATE THE REPORT OF UNDERREPORTED TIP. THE FINAL STEP IN THE PROCESS IS FOR YOU TO VALIDATE THE ACCURACY OF THE INFORMATION USED TO CALCULATE THOSE TIPS. THIS IS NOT A NEW STEP IN THE PROCESS, BUT IT IS A VERY IMPORTANT STEP. AS PART OF THE VALIDATION PROCESS, WE SEND A VALIDATION LETTER, WHICH INCLUDES THE REPORT THAT MAY NOT INCLUDE ALL THE EMPLOYEES INITIALLY SUBMITTED ON YOUR FORM 14439. DURING OUR REVIEW OF YOUR SUBMISSION WE MAY EXCLUDE EMPLOYEES WHO WORK FEW HOURS OR EMPLOYEES WHO HAD SUBSTANTIAL TIPS REPORTED. THEREFORE, WE'RE NOT ASKING YOU TO VERIFY 100% OF YOUR EMPLOYEES, JUST THE ONES ON THE SELECTED LIST. VALIDATION IS A VERY IMPORTANT STEP IN THE PROCESS. IT GIVES YOU THE OPPORTUNITY TO ENSURE THE DATA YOU PROVIDED IS ACCURATE, ANOTHER CHANCE TO REVIEW AND VERIFY THE DATA FOR A SAMPLE OF EMPLOYEES. FOR EXAMPLE, THE FORM 14439 MAY HAVE INCLUDED 200 EMPLOYEES WHEN YOU SUBMITTED IT. BUT THE IRS IS ONLY ASKING YOU TO VALIDATE THE DATA FOR 15. IT ONLY TAKES ONE ERROR IN THAT DATA TO SET OFF A CHAIN OF EVENTS THAT CREATES PROBLEMS FOR YOU, YOUR EMPLOYEES AND FOR US. IF YOU'VE ALREADY ENCOUNTERED THIS SITUATION, THEN YOU CAN ATTEST TO HOW MUCH TIME IT CAN TAKE TO CORRECT AN ERROR AFTER THE FACT. SO BY ENGAGING IN THE VALIDATION PROCESS, YOU CAN PREVENT THIS. THAT'S WHY THE VALIDATION PROCESS SAVES TIME FOR EVERYONE. TO IMPROVE THE OVERALL ACCURACY OF THESE CALCULATIONS, THE IRS NEEDS EMPLOYERS TO ACTIVELY PARTICIPATE IN THE VALIDATION PROCESS. PLEASE TAKE THE TIME TO MAKE SURE THE DATA PROVIDED FOR THE EMPLOYEES IS ACCURATE. MAKE SURE THE PARTICIPATION STATUS IS ACCURATE, IS THE EMPLOYEE A NEW HIRE OR AN EXISTING EMPLOYEE, DID THEY MEET THE CRITERIA TO BE CONSIDERED A PARTICIPANT, TEST THE HOURS BY SHIFT TO ENSURE THEY ARE ACCURATE AND EXCLUDE NON-TIPPED HOURS. DO THE TOTAL TIPS REPORTED FOR THE EMPLOYEE RECONCILE TO THE FORM W-2 AND EXCLUDE ALLOCATED TIPS. DID THE TIP REPORTING PROCESS WITHIN AN OUTLET CHANGE DURING THE YEAR, IF SO DID YOU CONTACT THE IRS TO PREPARE AN ADDENDUM TO UPDATE YOUR TIP AGREEMENT? IF NOT, AN ADDENDUM MUST BE COMPLETED AT THIS TIME. THE IRS MUST BE NOTIFIED OF CHANGES ON A TIMELY BASIS. LOOK AT THE EMPLOYEE'S WORK HISTORY.

DID THEY WORK IN DIFFERENT OCCUPATIONAL CATEGORIES, OUTLETS OR SHIFTS DURING THE YEAR? DID YOU ONLY USE THE LAST POSITION AND OUTLET THAT WAS LISTED FOR DECEMBER? IF THIS IS THE CASE, IT MUST BE CORRECTED. FINALLY, IF YOU'RE PULLING DATA FROM SEVERAL SYSTEMS AND PORTIONS OF THE DATA IS PREPARED BY ANOTHER EMPLOYEE. ASK THAT EMPLOYEE TO REVIEW THEIR PART OF THE REPORT. THE VALIDATION STEP IN THE PROCESS IS SO IMPORTANT THAT THE IRS HAS IMPLEMENTED NEW PROCEDURES TO IMPROVE THE ACCURACY. YOUR VALIDATION LETTER NOW INCLUDES A 30-DAY TIMEFRAME TO RESPOND, YOU MUST RESPOND WITHIN THIS TIMEFRAME. IF THE INFORMATION PROVIDED WITH A VALIDATION LETTER IS CORRECT THEN SEND AN E-MAIL STATING SUCH TO SBSE.TIP.COMPLIANCE@IRS.GOV. IF INFORMATION NEEDS TO BE CORRECTED, PROVIDE THE CORRECT INFORMATION WITHIN THE 30-DAY TIME FRAME TO THE SAME EMAIL ADDRESS.

AGAIN, I CANNOT OVERSTATE THE IMPORTANCE OF THIS STEP AND THE OVERALL PROCESS. LET ME SHOW YOU WHY. IN THIS EXAMPLE, WE HAVE A FOOD SERVER THAT WORKS AT THE BUFFET, THE FORM 14439 SUBMITTED BY THE EMPLOYER, THOSE 1,864 HOURS WORKED ON SWING SHIFT AND TOTAL TIPS REPORTED AS $16,000 BY THE NON-PARTICIPATING EMPLOYEE. THE SWING SHIFT HAS AN HOURLY TIP RATE OF $12 AND THE EMPLOYEE WORKED 1,864 HOURS, $12 MULTIPLIED BY 1864 HOURS IS $22,368 OF PROJECTED TIPS. THE EMPLOYEE REPORTED $16,000. THE DIFFERENCE BETWEEN THE PROJECTED TIPS AND REPORTED TIPS IS POTENTIAL UNDERREPORTED TIPS OF $6,368. HOWEVER, THIS EMPLOYEE IS PART OF A GROUP OF SELECTED EMPLOYEES TO HAVE THEIR INFORMATION VALIDATED. DURING THE VALIDATION PROCESS, IT IS DETERMINED THE EMPLOYEE WORKED 864 HOURS ON DAY SHIFT AND ONLY WORKED 1,000 HOURS ON SWING SHIFT. AND WHY IS THIS IMPORTANT? BECAUSE THE HOURLY TIP RATE PER DAY IS $7.50. THE HOURLY TIP RATE FOR SWING IS $12. THAT'S A BIG DIFFERENCE WHEN YOU'RE APPLYING IT TO HUNDREDS OF HOURS. THE NEW PROJECTED TIPS WOULD BE CALCULATED BASED ON HOURS AND TIP RATES FOR EACH SHIFT. THE DAY SHIFT WITH THE 864 HOURS MULTIPLIED BY THE HOURLY TIP RATE OF $7.50 FOR A TOTAL OF $6,480 IN PROJECTED TIPS. SWING SHIFT HOURS OF 1,000 WOULD BE MULTIPLIED BY THE $12 HOURLY TIP RATE FOR A TOTAL OF $12,000 IN PROJECTED TIP. THE TWO ADDED TOGETHER TOTALS $18,480 IN PROJECTED TIPS. AGAIN, THE TOTAL TIPS REPORTED BY THE EMPLOYEE WERE $16,000 FOR POTENTIAL UNDERREPORTED TIPS OF $2,480, NOT $6,368. THAT'S A BIG DIFFERENCE, ESPECIALLY TO YOUR EMPLOYEE. NOW, AGAIN, INACCURATE DATA CREATES UNNECESSARY NOTICES, AUDITS AND EVEN ASSESSMENTS. IRS AUDITS ARE STRESSFUL AND ERRORS NOT ONLY CREATE ADDITIONAL WORK FOR EVERYONE BUT CREATE DOUBT ABOUT THE INTEGRITY OF THE PROGRAM AND THE TIP AGREEMENT, THAT'S WHY ACCURATE INFORMATION IS SO IMPORTANT. LET'S LOOK AT ANOTHER EXAMPLE OF WHY THE VALIDATION PROCESS IS SO IMPORTANT. WE CONTINUE OUR EXAMPLE WITH EMPLOYEE WHO WORKED 1,864 HOURS. DURING THE VALIDATION PROCESS, YOU DETERMINE THAT THIS EMPLOYEE MOVES FROM AN ADMINISTRATIVE POSITION TO A TIPPED POSITION DURING THIS CALENDAR YEAR, AND THEY WORK 250 HOURS IN A NON-TIPPED POSITION. IN THE INITIAL EXAMPLE, THESE 250 HOURS WOULD HAVE HAD THE SWING RATE OF $12 PER HOUR APPLIED OVERSTATING TIPS BY $3,000. EVEN IF WE APPLIED THE LOWER DAY RATE OF $7.50 MULTIPLIED BY 250, THE EMPLOYEE'S TIPS ARE STILL OVERSTATED BY $1,875. SO AS YOU CAN SEE, ONE SMALL ERROR CAN HAVE BIG CONSEQUENCES FOR YOUR EMPLOYEES, ESPECIALLY IF THEY GET NOTICES FROM THE IRS. THESE EXAMPLES SHOW WHY IT'S SO IMPORTANT TO BE ATTENTIVE TO THE DETAILS. ENSURE THE CORRECT TIP RATE IS APPLIED TO THE CORRECT HOURS AND EXCLUDE ANY NON-TIPPED HOURS FROM THE FORM 14439 SUCH AS HOURS IN NON-TIPPED POSITIONS, PAID TIME-OFF, SICK LEAVE, TRAINING, ET CETERA. SECONDLY, IT ALSO SHOWS HOW IMPORTANT IT IS THAT YOU ENGAGE IN THE VALIDATION PROCESS. SO PLEASE TAKE TIME TO REVIEW THE DATA AND VALIDATE THAT THE INFORMATION IS ACCURATE OR PROVIDE CORRECTIONS TO THE ANALYST FOR ANY DISCREPANCIES. IT IS VERY IMPORTANT THAT YOU FOLLOW THE PROCESS AND RESPOND WITHIN THE 30-DAY TIME FRAME VIA E-MAIL TO SBSE.TIP.COMPLIANCE@IRS.GOV. THE VALIDATION IS IMPORTANT AND YOUR ACKNOWLEDGEMENT IS REQUIRED. NOW, LET'S TURN OVER TO WALTER TO WRAP-UP OUR PRESENTATION. WALTER BUDZINSKI: THANKS, JENNIFER. AND THAT WAS SOME GREAT INFORMATION ON THE VALIDATION PROCESS. SO LET'S START WITH SOME COMMON QUESTIONS. AND THE FIRST QUESTION IS, HOW DO I DETERMINE PARTICIPATION STATUS? WELL, A NON-PARTICIPANT IS A NEWLY HIRED TIPPED EMPLOYEE WHO DOES NOT JOIN THE PROGRAM WITHIN 60 DAYS FROM THEIR DATE OF HIRE OR JOINS BUT FAILS TO PARTICIPATE IN THE PROGRAM FOR THE REMAINDER OF THE YEAR. EXISTING TIPPED EMPLOYEES OR NON-PARTICIPANTS IF THEY FAIL TO PARTICIPATE THE ENTIRE CALENDAR YEAR. PARTICIPATED PART OF THE YEAR AND THEN DROPPED OUT OR JOINED MID-YEAR DUE TO A CHANGE IN THE TIP RATES SUCH AS A NEW AGREEMENT OR A CHANGE IN TIP RATES SUCH AS AN ECONOMIC TERM DOWN. HERE'S ANOTHER COMMON QUESTION. WHEN WOULD I HAVE MULTIPLE LINES OF DATA FOR THE SAME EMPLOYEE? WELL, IT IS COMMON TO HAVE MULTIPLE LINES FOR EXTRA BOARD OR ON-CALL EMPLOYEES BECAUSE THESE EMPLOYEES WILL WORK MULTIPLE OUTLETS AND SHIFTS AND SOMETIMES EVEN OCCUPATIONS. AN EMPLOYEE WORKS MULTIPLE VENUES SUCH AS 2 DAYS PER WEEK IN OUTLET A, AND THE OTHER 3 DAYS IN OUTLET B. WHEN AN EMPLOYEE HAS CHANGED OCCUPATIONS DURING THE YEAR SUCH AS BUS PERSON TO A FOOD SERVER. WHEN AN EMPLOYEE WORKS MULTIPLE SHIFTS DURING THE YEAR AND THAT POSITION HAS DIFFERENT RATES FOR EACH SHIFT. IF WE HAVE MULTIPLE TITLES FOR THE SAME OCCUPATIONS, SUCH AS BARTENDER APPRENTICE, APPRENTICE BT OR APPR BARTENDER. DO I HAVE TO CORRECT THEM TO MATCH THE OCCUPATION TITLE FOR THIS POSITION LISTED ON THE CURRENT AGREEMENT? AND THE SIMPLE ANSWER TO THAT IS, YES. BECAUSE EACH TIME WE IMPLEMENT A NEW TIP AGREEMENT, WE WORK WITH YOU TO ENSURE THAT THE TITLES USED IN YOUR SYSTEM ARE LISTED ON THE APPENDIX A OR ATTACHMENT B. THEREFORE, WHEN YOU PREPARE YOUR YEAR-END REPORT, YOU SHOULD ENSURE THAT THE TITLES MATCH THE APPENDIX A OR ATTACHMENT B. YOU ALSO NEED TO HAVE ALL VARIATIONS OF TITLES THAT YOU USE INCLUDED ON YOUR APPENDIX A OR ATTACHMENT B. IF NOT, YOU SHOULD CONTACT YOUR TIP COORDINATOR, AND WE WILL ISSUE AN ADDENDUM TO ADD OR CHANGE THE TITLES. REMEMBER, IF YOUR APPENDIX A OR ATTACHMENT B THAT WE HAVE ON FILE IS NOT CURRENT, YOUR YEAR-END REPORT WILL NOT BE CORRECT. WE ALSO HAVE MANY EDUCATIONAL MATERIALS THAT YOU CAN ORDER OR DOWNLOAD AT WWW.IRS.GOV TO ASSIST YOU WITH EDUCATING YOUR EMPLOYEES ABOUT TIP REPORTING COMPLIANCE AND THE TIP PROGRAM, AS WELL AS TO ASSIST YOU ON COMPLYING WITH THE ANNUAL REPORTING REQUIREMENTS FOR YOUR TIP AGREEMENT. WE ARE AWARE THAT MANY TIMES THERE ARE LIMITS ON THE QUANTITY OF PUBLICATIONS THAT CAN BE ORDERED. YOU NEED A LARGER SUPPLY, PLEASE CONTACT YOUR TERRITORY TIP COORDINATOR. IF THEY DON'T HAVE A SUPPLY ON HAND TO MEET YOUR NEEDS, THEY CAN ORDER THE LARGER QUANTITY AND HAVE THEM SENT TO YOU. BY NOW YOU'VE PROBABLY FIGURED OUT HOW IMPORTANT THIS REPORT IS AND HOW CRITICAL IT IS THAT WE WORK TOGETHER TO ENSURE ITS ACCURACY. SO, LET ME RECAP A FEW POINTS THAT WE REALLY WANT YOU TO UNDERSTAND AND CONSIDER. OUTLET OCCUPATION, SHIFT TITLES AND FORM 14439 MUST MATCH TITLES LISTED ON APPENDIX A OR ATTACHMENT B. EXCLUDE ALL NON-TIPPED POSITIONS AND HOURS WORKED IN THOSE NON-TIPPED POSITIONS FROM FORM 14439 INCLUDING ADMINISTRATIVE, MEETING, VACATIONS. TIMEFRAME FOR HOURS AND TIPS SHOULD BE THE SAME AS THE PAY PERIODS USED TO PREPARE EMPLOYEES W-2 EVEN THOUGH IT IS REFERRED TO AS A CALENDAR YEAR. EXCLUDE AUTO GRATUITIES/SERVICE CHARGES FOR TIP AS THEY ARE WAGES. EXCLUDE EMPLOYEES WHO WORK AT OUTLETS THAT IMPOSE AUTO GRATUITIES AND SERVICE CHARGES ON 100% OF THEIR SALES, RESPOND TO THE VALIDATION LETTER WITHIN 30 DAYS. REMEMBER, THE YEAR-END PROCESS AS PART OF THE RESPONSIBILITY AND OBLIGATIONS OF THE TIP AGREEMENT. FAILURE TO PROVIDE DOCUMENTS CAN RESULT IN TERMINATION OF THE AGREEMENT AND THE TIP AUDIT PROTECTION. THIS CONCLUDES OUR DISCUSSION ON THE FORM 14439 YEAR-END REPORT REQUIRED TO BE SUBMITTED ANNUALLY TO REMAIN IN COMPLIANCE WITH YOUR TIP AGREEMENT.

HOPEFULLY, YOU HAVE A BETTER UNDERSTANDING OF HOW WE USE THESE REPORTS AND HOW INCREDIBLY IMPORTANT IT IS THAT THEY BE ACCURATE, ITS OVERALL SUCCESS DEPENDS ON THE ACCURACY OF THE DATA, AND ON US WORKING TOGETHER AS A TEAM. IF YOU HAVE QUESTIONS ABOUT THE TIP PROGRAM OR NEED TO UPDATE YOUR TIP AGREEMENT, YOU SHOULD CONTACT YOUR TERRITORY TIP COORDINATOR FOR THE AREA IN WHICH YOUR PROPERTY OR ESTABLISHMENT IS PHYSICALLY LOCATED. THE TERRITORY TIP COORDINATORS ARE YOUR LIAISON FOR THE NTRC PROGRAM. IF YOU HAVE QUESTIONS ABOUT WHO TO CONTACT, PUBLICATION 4936 LISTS THE STATES BY TERRITORY AND THE RESPONSIBLE TERRITORY TIP COORDINATOR. YOUR TERRITORY TIP COORDINATOR IS THE FIRST LEVEL OF CONTACT TO ENSURE THAT YOU PROPERLY MAINTAIN YOUR TIP AGREEMENT.

SO, IF YOU ADD NEW OUTLETS, NEW OCCUPATIONS, CHANGE OPERATIONS, CHANGE OWNERSHIP, IMPLEMENT A NEW PAYROLL SYSTEM, CHANGE OUTLET OR SHIFT NAMES, CHANGE YOUR EMPLOYER IDENTIFICATION NUMBER, NEED ASSISTANCE WITH EDUCATING YOUR EMPLOYEES OR JUST HAVE QUESTIONS ON PREPARING YEAR-END REPORTS, REACH OUT TO YOUR TERRITORY TIP COORDINATOR, SO THEY CAN WORK WITH YOU TO ENSURE THAT YOUR AGREEMENT PROPERLY REFLECTS THE STATUS OF YOUR OPERATIONS. THANK YOU FOR TAKING THE TIME TO VIEW THIS WEBINAR. HOPEFULLY, YOU HAVE GAINED SOME VALUABLE INFORMATION AND PREPARING AND MEETING YOUR YEAR-END FILING REQUIREMENTS FOR FORM 14439.