SECTION 8. REVOCATION

.01 Employer revocation. For an employer to terminate participation in ATIP for an establishment prior to the end of the calendar year, the employer must notify the Service in writing by sending a letter to the address in section 13 of this revenue procedure in advance of the first day of the first payroll period for which the establishment will not participate in ATIP. An employer must also notify employees of the establishment that it will no longer participate in ATIP and that employees must begin reporting their tips as required by section 6053(a) of the Code. An employer may satisfy the employee notification requirement by providing each tipped employee with a copy of the letter sent to the address in section 13 of this revenue procedure at least seven days prior to the first day of the payroll period for which the employees will be required to report tips.

.02 Employee revocation. An employee who signs an employee participation agreement remains a participating employee until the employee revokes the employee participation agreement. An employee revokes participation in ATIP by providing the employer a signed notice revoking the prior agreement or by reporting tips in an amount less than the amount attributed to the employee. See section 5.07 of this revenue procedure.

which the establishment is participating in ATIP.

(2) Code section 3121(q) notice and demand. Any section 3121(q) notice and demand issued to the employer with respect to a participating establishment relating to any period during which the establishment is participating in ATIP will be based solely on amounts reflected on:

(a) Form 4137, Social Security and Medicare Tax on Unreported Tip Income, filed by an employee with Form 1040; or

(b) Form 885–T, Adjustment of Social Security Tax on Tip Income Not Reported to Employer, prepared at the conclusion of an employee tip examination; or

(c) The reporting of additional tip income by a participating employee.

At the Service’s discretion, the Service may continue any ongoing examination of the employer or establishment begun by the Service for a taxable period before the employer notifies the Service of its intent to participate in ATIP.

(3) A participating establishment will be considered in compliance with the reporting requirements of section 6053(c)(2) and (3) of the Code regarding allocation of tips to participating employees for the taxable periods during which the employer’s participation in ATIP remains in effect.

.02 Benefits to participating employees. The Service will act as follows with respect to a participating employee who meets all the requirements of section 5 of this revenue procedure.

(1) The Service will not examine a participating employee’s tip income with respect to the participating establishment for any period during which the employee is a participating employee, provided the employee reported as wages on his or her federal income tax return at least the amount of attributed tips reported to the employee in connection with employment at the participating establishment on Form W–2. The Service may examine a participating employee’s tip income with respect to the participating establishment for any period if the employee reports on his or her federal income tax return less than the amount of tip income attributed to him or her under ATIP and reported in connection with employment at the participating establishment on the employee’s Form W–2 as tips.

(2) If an employee becomes a participating employee more than 30 days after becoming employed as a tipped employee, the Service may examine the participating employee’s tip income received in connection with employment at the participating establishment before the employee becomes a participating employee. At the Service’s discretion, the Service may continue any ongoing examination of any tipped employee of the employer started by the Service before the effective date of the employer’s participation in this program.

.03 Status of nonparticipating employee. A nonparticipating employee is subject to the full range of compliance and enforcement procedures available to the Service including examination of tip income for any time period. The Service has authority, including the issuance and enforcement of summonses pursuant to sections 7602, 7604, and 7609 of the Code, to secure the information necessary for the Service to develop the tip rates of nonparticipating employees including information in possession of the participating employer.