SECTION 5. EMPLOYEE

PARTICIPATION IN ATIP

.01 In order to participate and receive the benefits set forth in section 6 of this revenue procedure, an employee must satisfy all of the requirements in this section.

.02 The employee must be a tipped employee.

.03 The employee must sign an employee participation agreement with the employer. If an employee works at more than one participating establishment owned or operated by the employer, the employee must sign a separate employee participation agreement for each establishment.

.04 The employee must report on his or her federal income tax return at least the amount of tip income attributed to him or her under ATIP and reported on the employee’s Form W–2 as tips. A participating employee may report tips on his or her federal income tax return below or above the amount of tip income attributed to him or her under ATIP and reported on the employee’s Form W–2 as tips. However, any participating employee who fails to report on his or her federal tax return all of the tips reported by the employer on the employee’s Form W–2 for that year will not receive the benefits provided by section 6.02 of this revenue procedure. An employee who reports less than the amount of tips reported by the employer on Form W–2 must be able to substantiate, with adequate books and records, that the tip income earned was less than the amount reported on the Form W–2.

.05 Period of participation. (1) General rule. Except as provided in section 5.04 of this revenue procedure, a participating employee receives the benefits of ATIP for periods beginning after the later of (1) the effective date of the employer’s participation (see section 4.03) or

July 31, 2006 115 2006–31 I.R.B.

of the payroll period in which written notice from the Service is received. If an employer fails to notify employees that it will no longer attribute tip income, the employer (but not the participating employees) will lose the protections provided in section 6 of this revenue procedure for the entire calendar year, regardless of when the employer stopped attributing tip income.

.02 Employee. If the participating employee reports an amount of tips for a given period that is less than the amount the employer would have attributed to that employee for that period, the participating employee revokes his or her employee participation agreement, effective the first day of the payroll period for which the employee reports an amount of tips less than the amount the employer would have attributed to the employee. On that date the employee loses the benefits of section 6.02 of this revenue procedure.