Participating employers report tip income of employees based on a formula that uses a percentage of gross receipts, which are generally allocated among employees based on the practices of the restaurant. The IRS does not initiate a tip examination during the period the employer and employee participate in ATIP and participating employees do not have to keep a daily tip log or other tip records.
Employers elect to join the programby checking the designated box on Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Employees only need to sign an agreement with a participating employer to have tip income computed under the program and reported as wages.