[Federal Register Volume 65, Number 240 (Wednesday, December 13, 2000)]
[Rules and Regulations]
[Pages 77818-77820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31499]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 31 and 602
[TD 8910]
RIN 1545-AV28
Electronic Tip Reports
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document amends the regulations dealing with the
requirement that tipped employees report their tips to their employer.
These final regulations permit employers to establish electronic
systems for use by their tipped employees in reporting tips to the
employer. These final regulations also address substantiation
requirements for employees using the electronic system.
DATES: Effective Date: These regulations are effective December 13,
2000.
Applicability Dates: For dates of applicability, see Sec. 31.6053-
1(d)(6) of these regulations.
FOR FURTHER INFORMATION CONTACT: Karin Loverud at 202-622-6080 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1603. Responses to this collection of information
are mandatory.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number assigned by the Office of
Management and Budget.
The estimated annual burden per respondent varies from 1 hour to 3
hours, depending on individual circumstances, with an estimated average
of 2 hours.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, W:CAR:MP:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503.
Books or records relating to this collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
On January 26, 1998, the IRS published in the Federal Register (63
FR 3681) a notice of proposed rulemaking (REG-104691-97) under section
6053 of the Internal Revenue Code relating to electronic tip reports.
The notice proposed to amend Sec. 31.6053-1 and Sec. 31.6053-4 of the
employment tax regulations.
No written comments responding to the notice of proposed rulemaking
were received. No public hearing was requested or held. Accordingly,
the proposed regulations are adopted as final regulations.
[[Page 77819]]
The final regulations are consistent with the provisions of the
Electronic Signatures in Global and National Commerce Act.
Special Analyses
It has been determined that these final regulations are not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. Further, it is
hereby certified, pursuant to sections 603(a) and 605(b) of the
Regulatory Flexibility Act (5 U.S.C. chapter 6), that the collection of
information contained in these regulations will not have a significant
economic impact on a substantial number of small entities. The
collection of information in Sec. 31.6053-1 is imposed solely on
individuals, not on any small entities, and the regulations provide
flexibility to employees who must provide the information required by
statute, thereby reducing burden. With respect to the collection of
information in Sec. 31.6053-4, the certification is based on the
expectation of the IRS that most businesses that choose to implement
the electronic tip reporting provisions will be larger businesses with
many employees and sophisticated computer systems. Moreover, because
the provision is wholly elective, any small business that would be
adversely impacted may choose not to use electronic tip reporting.
Finally, the Service expects that for those small entities that choose
to implement the provision, the use of electronic tip reporting will
reduce overall burden by reducing paper collections. Therefore, a
regulatory flexibility analysis under the Regulatory Flexibility Act is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Karin Loverud, Office
of Division Counsel/Associate Chief Counsel (Tax Exempt and Government
Entities). However, other personnel from the IRS and the Treasury
Department participated in their development.
List of Subjects
26 CFR Part 31
Employment taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 31 and 602 are amended as follows:
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Paragraph 1. The authority citation for part 31 continues to read
in part as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. Section 31.6053-1 is amended as follows:
1. Paragraph (a) is revised.
2. The introductory text of paragraph (b)(1) is revised.
3. The last sentence of paragraph (b)(1)(iii) is revised.
4. Paragraph (b)(2) is revised.
5. Paragraph (c) is revised.
6. Paragraph (d) is added.
The revisions and additions read as follows:
Sec. 31.6053-1 Report of tips by employee to employer.
(a) Requirement that tips be reported--(1) In general. An employee
who receives, in the course of employment by an employer, tips that
constitute wages as defined in section 3121(a) or section 3401, or
compensation as defined in section 3231(e), must furnish to the
employer a statement, or statements, disclosing the total amount of the
tips received by the employee in the course of employment by the
employer. Tips received by an employee in a calendar month in the
course of employment by an employer that are required to be reported to
the employer must be reported on or before the 10th day of the
following month. For example, tips received by an employee in January
2000 are required to be reported by the employee to the employer on or
before February 10, 2000.
(2) Cross references. For provisions relating to the treatment of
tips as wages for purposes of the Federal Insurance Contributions Act
(FICA) tax under sections 3101 and 3111, see sections 3102(c),
3121(a)(12), and 3121(q) and Secs. 31.3102-3 and 31.3121(a)(12)-1. For
provisions relating to the treatment of tips as wages for purposes of
the tax under section 3402 (income tax withholding), see sections
3401(a)(16), 3401(f), and 3402(k) and Secs. 31.3401(a)(16)-1,
31.3401(f)-1, and 31.3402(k)-1. For provisions relating to the
treatment of tips as compensation for purposes of the Railroad
Retirement Tax Act (RRTA) tax under sections 3201 and 3201, see section
3231(e) and Sec. 31.3231(e)-1(a).
(b) * * * (1) In general. The statement described in paragraph (a)
of this section can be provided on paper or transmitted electronically.
The statement must be signed by the employee and must disclose:
* * * * *
(iii) * * * If the statement is for a period of less than 1
calendar month, the beginning and ending dates of the period must be
included (for example, January 1 through January 8, 1998).
* * * * *
(2) Form of statement--(i) In general. No particular form is
prescribed for use in furnishing the statement required by this
section. The statement may be furnished on paper or transmitted
electronically. An electronic system and all tip statements generated
by that system must meet the requirements of paragraph (d) of this
section. If the employer does not provide any other means for the
employee to report tips, the employee may use Form 4070, ``Employee's
Report of Tips to Employer.''
(ii) Single-purpose forms. A statement may be furnished on an
employer-provided form. The form may be on paper or in electronic form.
An employer that provides a paper form must make blank copies of the
form readily available to all tipped employees. Any form, whether paper
or electronic, provided by an employer for use by its tipped employees
solely to report tips must meet all the requirements of paragraph
(b)(1) of this section.
(iii) Regularly used forms. Instead of requiring that tips be
reported as described in paragraph (b)(2)(ii) of this section on a
special form used solely for tip reporting, an employer may prescribe
regularly used forms for use by employees in reporting tips. A
regularly used form may be on paper or in electronic form (such as a
time card or report), must meet the requirements of paragraph (b)(1)
(iii) and (iv) of this section, must contain identifying information
that will ensure accurate identification of the employee by the
employer, and is permitted to be used only if the employer furnishes
the employee a statement suitable for retention showing the amount of
tips
[[Page 77820]]
reported by the employee for the period. The employer statement may be
furnished when the employee reports the tips, when wages are first paid
following the reporting of tips by the employee, or within a short time
after the wages are paid. The employer may meet this requirement, for
example, through the use of a payroll check stub or other payroll
document regularly furnished (if not less frequent than monthly) by the
employer to the employee showing gross pay and deductions.
(c) Period covered by, and due date of, tip statement--(1) In
general. A tip statement furnished by an employee to an employer may
not cover a period greater than 1 calendar month. An employer may,
however, require the submission of a statement in respect of a
specified period of time, for example, on a weekly or biweekly basis,
regular payroll period, etc. An employer may specify, subject to the
limitation in paragraph (a) of this section, the time within which, or
the date on which, the statement for a specified period of time should
be submitted by the employee. For example, a statement covering a
payroll period may be required to be submitted on the first (or second)
day following the close of the payroll period. A statement submitted by
an employee after the date specified by the employer for its submission
nevertheless is a statement furnished pursuant to section 6053(a) and
this section if it is submitted to the employer on or before the 10th
day following the month in which the tips were received.
(2) Termination of employment. If an employee's employment
terminates, the employee must furnish a tip statement to the employer
when the employee ceases to perform services for the employer. A
statement submitted by an employee after the date on which the employee
ceases to perform services for the employer is a statement furnished
pursuant to section 6053(a) and this section if the statement is
submitted to the employer on or before the earlier of the day on which
the final wage payment is made by the employer to the employee or the
10th day following the month in which the tips were received.
(d) Requirements for electronic systems--(1) In general. The
electronic system must ensure that the information received is the
information transmitted by the employee and must document all occasions
of access that result in the transmission of a tip statement. In
addition, the design and operation of the electronic system, including
access procedures, must make it reasonably certain that the person
accessing the system and transmitting the statement is the employee
identified in the statement transmitted.
(2) Same information as on paper statement. The electronic tip
statement must provide the employer with all the information required
by paragraph (b)(1) of this section.
(3) Signature. The electronic tip statement must be signed by the
employee. The electronic signature must identify the employee
transmitting the electronic tip statement and must authenticate and
verify the transmission. For this purpose, the terms authenticate and
verify have the same meanings as they do when applied to a written
signature on a paper tip statement. Any form of electronic signature
that satisfies the foregoing requirements is permissible.
(4) Copies of electronic tip statements. Upon request by the
Internal Revenue Service (IRS), the employer must supply the IRS with a
hard copy of the electronic tip statement and a statement that, to the
best of the employer's knowledge, the electronic tip statement was
filed by the named employee. The hard copy of the electronic tip
statement must provide the information required by paragraph (b)(1) of
this section, but need not be a facsimile of Form 4070 or any employer-
designed form.
(5) Record retention. The record retention requirements applicable
to automatic data processing systems also apply to electronic tip
reporting systems.
(6) Effective date. The provisions pertaining to electronic systems
and electronic tip reports are applicable as of December 13, 2000.
However, employers may apply these provisions to earlier periods.
Par. 3. Section 31.6053-4 is amended as follows:
1. A sentence is added to paragraph (a)(1) after the third
sentence.
2. A sentence is added to paragraph (a)(2) after the fourth
sentence.
The additions read as follows:
Sec. 31.6053-4 Substantiation requirements for tipped employees.
(a) * * * (1) * * * The Commissioner may by revenue ruling,
procedure or other guidance of general applicability provide for other
methods of demonstrating evidence of tip income. * * *
(2) * * * In addition, an electronic system maintained by the
employer that collects substantially similar information as Form 4070A
may be used to maintain such daily record, provided the employee
receives and maintains a paper copy of the daily record. * * *
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 5. In Sec. 602.101, paragraph (b) is amended by revising the
entries for 31.6053-1 and 31.6053-4 to read as follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
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Current
OMB
CFR part or section where identified and described control
No.
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* * * * *
31.6053-1................................................... 1545-0029
1545-0062
1545-0064
1545-0065
1545-1603
* * * * *
31.6053-4................................................... 1545-0065
1545-1603
* * * * *
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Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
Approved: August 25, 2000.
Jonathan Talisman,
Acting Assistant Secretary of the Treasury.
[FR Doc. 00-31499 Filed 12-12-00; 8:45 am]
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