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For those employees not on compliance the hospitality
gratuity is posted to their paychecks biweekly;
however, they do not have the percentage of sales for
the standard room service functions posted to their
checks. It then becomes the employee’s responsibility
to declare tips received from these sales.
Room service food servers can elect to participate in the
tip compliance agreement. Petitioner did not choose to do so for
2002.4
Petitioner’s Net Sales
Petitioner’s net sales for 2002 from the room service
function were $61,427.78.5
Petitioner’s Form W-2 and Tax Return
Petitioner received a Form W-2, Wage and Tax Statement, from
the Las Vegas Hilton for 2002. The Form W-2 reported wages of
$21,658 and tips of $5,153, for total compensation of $26,811.
Petitioners included this latter amount, along with petitioner
Tabitha Pimpleton’s wages, on line 7 of their timely filed income
tax return.
Respondent’s Deficiency Determination
In the notice of deficiency, respondent determined that
petitioner underreported his tips for 2002 by $4,275. Respondent
determined this amount by subtracting reported tips of $5,153
4 Petitioner has since elected to participate in the tip
compliance program.
5 So stipulated.
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Last modified: May 25, 2011