Federal housing law
1121 Publ 3144 (PDF)
Federal housing law as enacted — verbatim and citable.
- Edition
- 2026-10-03
- Last updated
- 2026-10-04
- Jurisdiction
- United States
Official source: IRS Forms, Instructions & Publications (https://www.irs.gov/pub/irs-pdf/p3144.pdf), retrieved 2026-10-03. U.S. Government work (17 U.S.C. § 105).
Publication 3144 (Rev. 11-2021) Catalog Number 26288G Department of the Treasury Internal Revenue Service www.irs.gov
If you are an employer of an employee who receives tip income, this guide is for you.¶
The Internal Revenue Service (IRS) began its Tip Rate Determination/Education Program (TRD/EP) in October 1993 for businesses where tip income is customary. The objective of the Program has been to improve and ensure compliance by employers and employees with statutory provisions relating to tip income.
3
The Program of Tip Reporting¶
What tip reporting options are available?¶
Tip Rate Determination Agreement (TRDA)
Tip Reporting Alternative Commitment (TRAC)
Institute your own reporting system to comply with the tax law
Gaming Industry Tip Compliance Agreement (GITCA)
Under the Tip Rate Determination/Education Program (TRD/ EP), the employer may enter into a TRDA, a TRAC, or GITCA agreement, depending on the specific business. The IRS will assist applicants in understanding and meeting the requirements for participation. The next pages show how these agreements differ.
How does the program benefit my employees?¶
There are a number of reasons why an employee should report all of his/her tip income:
Increased income may improve financial approval when applying for mortgage, car, and other loans
Increased social security and Medicare benefits (the more you
How To Get Your Program Underway¶
How To Apply¶
To enter into one of the agreements by sending an e-mail to Tip.Program@irs.gov.
Who Should Apply¶
Currently, the IRS is offering participation in TRD/EP to employers who employees receive tip income in the normal course of your business. These agreements accommodate every tipping industry.
All employers with establishments where tipping is customary should review their operations.
When To Apply¶
An employer may apply for one of the agreements, depending on his/her specific business, at any time. The effective date of the arrangement is determined by receipt and handling of the employer’s application.
TRAC and TRDA are effective as of the first day of the quarter following the date the National Tip Reporting Compliance (NTRC) Program Manager signs the agreement.
The GITCA is effective on a mutually agreed upon date, generally the first day of a pay period.
TRDA vs. TRAC vs. GITCA (how they differ)¶
| TRAC | TRDA | GITCA |
|---|---|---|
| TRAC does not require that a tip rate be established but it does require the employer to: establish a procedure where a directly-tipped employee is provided (no less than monthly) a written statement of charged tips attributed to the employee. implement a procedure for the employees to verify or correct any statement of attributed tips. adopt a method where an indirectly-tipped employee reports his or her tips (no less than monthly). This could include a statement prepared by the employer and verifed or corrected by the employee. establish a procedure where a written statement is prepared and processed (no less than monthly) refecting all cash tips attributable to sales of the directly-tipped employee. |
TRDA requires the IRS to work with the establishment to arrive at a tip rate for the establishment’s various occupations. |
GITCA requires the IRS to work with the establishment to arrive at a tip rate for the establishment’s various occupations. |
| TRAC does not require an agreement between the employee and employer. |
TRDA requires the employee to enter into a Tipped Employee Participation Agreement (TEPA) with the employer. |
GITCA requires the employee to enter into a Model Gaming Employee Tip Reporting Agreement with the employer. |
| TRAC affects all (100%) employees. | TRDA requires the employer to get 75% of the employees to sign TEPAs and report at or above the determined rate. |
GITCA requires the employer to get 75% of the employees to sign Model Gaming Employee Tip Reporting Agreements and report at or above the determined rate. |
| TRAC provides that if the employees of an establishment collectively underreport their tip income, tip examinations may occur but only for those employees that underreport. |
TRDA provides that if employees fail to report at or above the determined rate, the employer will provide the names of those employees, their social security numbers, job classifcation, sales, hours worked, and amount of tips reported. |
GITCA provides that if employees fail to report at or above the determined rate, the employer will provide the names of those employees, their social security numbers, job classifcation, sales, hours worked, and amount of tips reported. |
| TRAC includes a commitment by the employer to educate and reeducate quarterly all directly and indirectly- tipped employees and new hires of their statutory requirement to report all tips to their employer. |
TRDA has no specifc education requirement. |
GITCA has no specifc education requirement. |
| TRAC participation assures the employer that prior periods will not be examined as long as participants comply with the requirements under the agreement. |
TRDA participation assures the employer that prior periods will not be examined as long as participants comply with the requirements under the agreement. |
GITCA participation assures the employer that prior periods will not be examined as long as participants comply with the requirements under the agreement. |
7
Example of a TRAC Statement¶
Use the following “example” to help you develop your statement for your specific business, and provide a copy to your employees. (The following example is designed specifically for employees in the food and beverage industry.) A TRAC statement is given to an employee showing tips attributed to him/her. This example not only fulfills the statement required for charged tips but also for cash tip reporting and for indirectly-tipped employee reporting.
| Employer Portion Employee Name: Mark Doe Employee Address: 123 Main Street City, State, Zip: Any Town, USA 12345 Employee SSN: 000-00-000 Job Category: Food Server Establishment Name: ABC Bar & Grill Employer EIN: 00-0000000 Report Period: 01/01/00 - 01/31/00 Gross Sales: $6,000 Charged Sales w/ Charged Tips; $380 Charged Tip Rate 19% Sales Subject to Cash tips $4,000 |
Employer fills out top portion. Gross Sales: only include food & drink amount. Do not include tax, tip, or non-food/ drink items. Charged Sales: include charged sales that show a tip on food & drink amounts only. Do not include tax, tip or non- food/ (A charged sale with no tip is included as a cash sale.) Employee fills out bottom portion. An indirectly-tipped employee would only receive (from the employer) the “title” portion of the statement filled out, unless employer captured “tips shared w/ mation from the directly-tipped employee’s TRAC Statement and showed it as “tips received from others”. Employee signs statement and gives a copy to employer, retaining a copy for his/ records. This statement would satisfy employer’s requirement under the TRAC arrangement and the employee’s require- ment under the law. |
|---|---|
| Employee Portion Cash Tips $720 Cash Tip Rate 18% Tips Shared w/ Name: Job Category: Amount: Johnny Noname Busser $120 Total (120) Tips Recieved from Others Name: Job Category: Amount Susie Cue Cocktail $100 Total 100 Net tips kept and reportable: $1,080 Employee Signature: Date: |
9
Forms and Publications¶
The following is a list of IRS publications and forms relating to tip income reporting that can be downloaded from the IRS Web site at www.irs.ustreas.gov and can be ordered through the IRS by dialing 1-800-829-3676. (TTY/TDD equipment access, dial 1-800-829-4059).
Publication 505 – Tax Withholding and Estimated Tax
Publication 531 – Reporting Tip Income
Publication 1244 – Employee’s Daily Record of Tips and Report to Employer. This publication includes Form 4070, Employee’s Report of Tips to Employer, and Form 4070A, Employee’s Daily Record of Tips.
Form 941 – Employer’s Quarterly Federal Tax Return
Form 1040ES – Estimated Tax for Individuals
Form 4137 – Social Security and Medicare Tax on Unreported Tip Income
Form 8027 – Employer’s Annual Information Return of Tip Income and Allocated Tips
Form W-2 – Wage and Tax Statement; and separate Instructions for Forms
W-2 and W-3