EMPLOYEE HANDBOOK SUPPLEMENT

TRAC

You Must Report 100% of Your Tips


100% of the tips you receive is income and must be reported.

Downplaying the tips, including rounding down, is a violation of IRS regulations.

  • By law, all tips to the employer
  • All tips received must be reported every time you work
  • If you report an arbitrary lessor amount; including round down, it's a telltale sign to the IRS
  • Employees audited for under-reporting tip income could find themselves paying penalties of as much as 50% of the unpaid taxes, plus interest

T.R.A.C. (Tip Rate Alternative Commitment)

Aldridge, Inc. is a TRAC participant. Under TRAC, audits and potential IRS penalties for under-reporting are shifted from employers to those who receive the tips, in exchange for educating tipped employees on tip reporting requirements. Click here to read more about TRAC if you like.

Other Important Reasons for Truthful Reporting

Reporting all your tip income will yield a better credit rating for a car, home or apartment; and greater Unemployment Insurance, Worker's Compensation Insurance, Disability Insurance if you have it, and in your future, Social Security benefits.