Did you know that an update to IRS Tip Reporting Guidelines requires hotel properties to report Service Charge as Wages, as opposed to reporting these amounts as Tips?
The IRS website states, “The Internal Revenue Service reminds employers that automatic gratuities are service charges, not tips.” For more details on this recent update, visit the IRS website.
Given this requirement, in order to guarantee IRS Tip Compliance, properties must keep an accurate track of direct tips, indirect tips (including to a pool), and service charges.
However, in most cases, programs used to process tip-outs, do not have the functionality to allow an associate to distinctly record the “Tip Out” as a Service Charge or Charged Tips. Instead, most programs automatically identify these transactions as Charged Tips. Therefore, these programs often record Service Charge tip outs as Charged Tips and leave hotels vulnerable to non-compliance with IRS Guidelines.
In working to comply with IRS guidelines, properties face the challenge of accounting for the discrepancies between POS programs and the actual details of the tip out. Often, hotels must result to using manual processes and even paper tip-sheets to work around limitations from POS programs and correct the data discrepancies.
Whereas most POS programs neglect to address the recent update from the IRS, Evention’s newest solution, Self-Service Tip Outs by Evention meets this industry-wide need head-on.
Self Service Tip Outs by Evention is the first of its kind; this solution provides guaranteed tip compliance, in addition to a more direct and efficient tip out process. This tool enhances visibility both internally for employee-relations and externally in terms of IRS tip compliance. Unlike Micros Tip Track and other programs, Self Service Tip-Outs by Evention maintains functionality for an associate to identify a “Tip-Out” either as a Service Charge or as Charged Tips.
Using this solution, employees directly allocate tips to either the appropriate employees or pool. In other words, tip outs and the management of these employee tip outs are completely automated. This solution allows an associate to make a tip-out either to another employee or to a pool, as well as identify this tip out as either a Service Charge or Charged Tips.
Learn about this solution and see how properties are leveraging this solution to guarantee tip compliance.