November 20, 2011 3:12:32 PM by
Priya Patel
Participating in an IRS Tip Agreement is like having an audit insurance policy.
If your business employs workers who earn a substantial portion of their income from tips (bartenders, restaurant or hotel workers, beauticians, casino employees and so on), then a tip agreement essentially provides you with immunity against an IRS audit.
The IRS established the Tip Compliance Agreement Program as a voluntary program (originally for the food and beverage industry) to encourage tax compliance and increase the frequency of reporting tip income, instead of using traditional enforcement methods such as tip examination.