Rev. Rul. 75-400

Rev. Rul. 69-28, 1969-1 C.B. 270, holds, in situation 2, that for purposes of the Federal Insurance Contributions Act and the Collection of Income Tax at Source on Wages (chapters 21 and 24, respectively, subtitle C, Internal Revenue Code of 1954), the amount of the tip written by a customer on a waiter's check and paid over to him by his employer is "wages" under sections 3121(a)(12)(B) and 3401(a)(16)(B) of the Code and must be reported to the employer pursuant to section 6053. However, Rev. Rul. 69-28 does not indicate (1) the method by which employees are to report the tips dealt with therein, nor (2) the responsibility on the part of employers to report such tips on Form W-2 (Wage and Tax Statement) regardless of the failure of the employees to report them to the employers.

Held, pursuant to Rev. Rul. 69-28, employees are required to report tips under section 6053(a) of the Code and must report the total amount of tips received, that is, the total of both those tips paid by the employer to the employee for charge customers and those tips received by the employee directly from the customer. Employers are required to include such total amount of tips reported to them in reporting wages on Form W-2 under section 31.6051-1 of the Employment Tax Regulations. Employees should report such tip income on Form 4070 or such form as is provided by the employer.

Although employers are not required to withhold on amounts not reported to them, under sections 1.6041-1(a)(1)(i) and 1.6041-2(a)(1) of the Income Tax Regulations, employers are required to report on Form W-2 whenever an employee's compensation, including tips that are paid over to the employee by the employer or reported by the employee as having been received directly from the customers aggregates $600 or more in a calendar year.

Pursuant to the authority contained in section 7805(b) of the Code, this provision will be applied beginning January 1, 1976. Thus, for calendar year 1975, the Service will accept Forms W-2 that show only the amount of tips that are reported by the employee to the employer on Form 4070 or a substitute.

Situation 2 in Rev. Rul. 69-28 is amplified.