To ensure accurate tracking of tips across hotel properties, Evention’s innovative software provides accurate tracking of tips that align with the IRS updated requirements.
Problem
Given the recent update to IRS requirements, accurate tracking of tips versus service charges is critical to ensure a hotel property’s tip compliance. Service charges (including those received as indirect tips) are treated as wages, as opposed to tips. Since this is the case, service charges are subject to social security tax, Medicare tax, and federal income tax withholding. As a result of this update to IRS requirements, guaranteeing hotel properties are tip compliant demands precise tracking of direct tips, indirect tips, and service charges. Programs, like Micros Tip Track, are not compliant with the new IRS requirements. In most cases, hotel employees are currently tipping out fellow associates through Micros Tip Track or a similar program.
In most cases, programs, such as Micros, do not have the functionality for an associate to identify whether the “Tip Out” is a Service Charge or Charged Tips – Instead, all tip outs default to Charged Tips, which is not compliant with IRS regulations. The IRS, however, requires properties to differentiate between Service Charge and Charged Tips, as Service Charges are imposed to the guest, and Charged Tips are discretionary to the guest. Therefore, when an associate tenders parties of more than five or applies a Service Charge for any reason and tracks via Micros Tip Track or another non-compliant program, these Tip Outs are currently non-compliant with IRS Tip Reporting.
Solution
The solution to these challenges was easily solved with Evention’s innovative software. Associates were able to log into Evention’s online cloud application using a mobile device, tablet, or desktop with a secure, unique login. This gives employees the ability to “Tip Out”, Charge Tips, Serve Charge, Charge Tip Sales, Service Charge Sales, and more, on an individual level or to a pool. Evention’s solutions were also able to generate a payroll file, which was uploaded and used to distribute all gratuities—this simple process guaranteed that each property remained compliant with IRS Tip Reporting guidelines. Using our robust reporting features, the managers simply approved and close the pay period with ease.
Results
The benefits and results realized across employee teams and accounting processes were many. For staff, tip-outs were easily calculated without the hassle of manual “tip-sheet” entries. This enabled employees to view reports with details of their direct and indirect tips simply by logging on a device at the end of the shift. For accounting practices, the property is now tip-compliant for both tips and service charges. The reporting allows management to ensure sales, tips and all charges paid out reconcile to the POS total each pay period since payroll for tip postings is now automated—saving management time with a new streamlined and automated process.