coverage of tips

coverage of tips Sec. 313. (a) (1) Section 209 of the Social Security Act is amended by striking out “or” at the end of subsection (j), by striking out the period at the end of subsection (k) and inserting in lieu thereof “; or”, and by adding immediately after subsection (k) the following new subsection: “(l) (1) Tips paid in any medium other than cash; “(2) Cash tips received by an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more.” (2) Section 209 of such Act is-further amended by adding at the end thereof the following new paragraph: “For purposes of this title, tips received by an employee in the course of his employment shall be considered remuneration for employment. Such remuneration shall be deemed to be paid at the time a written statement including such tips is furnished to the employer pursuant to section 6053(a) of the Internal Revenue Code of 1954 or (if no statement including such tips is so furnished) at the time received.” (b) Section 451 of the Internal Revenue Code of 1954 (relating to general rule for taxable year of inclusion) is amended by adding at the end thereof the following new subsection: “(c) Special Rum for Employee Tips.— For purposes of subsection (a), tips included in a written statement furnished an employer by an employee pursuant to section 6053(a) shall be deemed to be received at the time the written statement including such tips is furnished to the employer.” (c) (1) Section 3102 of such Code (relating to deduction of tax from wages) is amended by adding at the end thereof the following new subsection: “(c) Special Rule for Tips.— “(1) In the case of tips which constitute wages, subsection (a) shall be applicable only to such tips as are included in a written statement furnished to the employer pursuant to section 6053(a), and only to the extent that collection can be made by the employer, at or after the time such statement is so furnished and before the close of the 10th day following the calendar month (or, if paragraph (3) applies, the 30th day following the quarter) in which the tips were deemed paid, by deducting the amount of the tax from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) as are under control of the employer. “(2) If the tax imposed by section 3101, with respect to tips which are included in written statements furnished in any month to the employer pursuant to section 6053(a), exceeds the wages of the employee (excluding tips) from which the employer is required to collect the tax under paragraph (1), the employee may furnish to the employer on or before the 10th day of the following month (or if paragraph (3) applies, on or before the 30th day of the following quarter) an amount of money equal to the amount of the excess. “(3) The Secretary or his delegate may, under regulations prescribed by him. authorize employers— “(A) to estimate the amount of tips that will be reported by the employee pursuant to section 6053(a) in any quarter of the calendar year, 79 Stat. 383 “(B) to determine the amount to be deducted upon each payment of wages (exclusive of tips) during such quarter as if the tips so estimated constituted the actual tips so reported, and “(C) to deduct upon any payment of wages (other than tips, but including funds turned over by the employee to the employer pursuant to paragraph (2)) to such employee during such quarter (and within 30 days thereafter) such amount as may be necessary to adjust the amount actually deducted upon such wages of the employee during the quarter to the amount required to be deducted in respect of tips included in written statements furnished to the employer during the quarter. “(4) If the tax imposed by section 3101 with respect to tips which constitute wages exceeds the portion of such tax which can be collected by the employer from the wages of the employee pursuant to paragraph (1) or paragraph (3), such excess shall be paid by the employee.” (2) The second sentence of section 3102 (a) of such Code is amended by inserting before the period at the end thereof the following: “; and an employer who is furnished by an employee a written statement of tips (received in a calendar month) pursuant to section 6053(a) to which paragraph (12)(B) of section 3121 (a) is applicable may deduct an amount equivalent to such tax with respect to such tips from any wages of the employee (exclusive of tips) under his control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his employment by such employer is less than $20”. (3) Section 3121(a) of such Code (relating to definition of wages under the Federal Insurance Contributions Act) is amended by striking out “or” at the end of paragraph (10), by striking out the period at the end of paragraph (11) and inserting in lieu thereof “; or ”, and by adding after paragraph (11) the following new paragraph: “(12) (A) tips paid in any medium other than cash; “(B) cash tips received by an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more.” (4) Section 3121 of such Code is further amended by adding at the end thereof the following new subsection: “(q) Tips Included for Employee Taxes.— For purposes of this chapter other than for purposes of the taxes imposed by section 3111, tips received by an employee in the course of his employment shall be considered remuneration for employment. Such remuneration shall be deemed to be paid at the time a written statement including such tips is furnished to the employer pursuant to section 6053(a) or (if no statement including such tips is so furnished) at the time received.” (d) (1) Section 3401 of such Code (relating to definitions for purposes of collecting income tax at source on wages) is amended by adding at the end thereof the following new subsection: “(f) Tips.— For purposes of subsection (a), the term ‘wages’ includes tips received by an employee in the course of his employment. Such wages shall be deemed to be paid at the time a written statement including such tips is furnished to the employer pursuant to section 6053(a) or (if no statement including such tips is so furnished) at the time received.” 79 Stat. 384 (2) Section 3401(a) of such Code (relating to definition of wages for purposes of collecting income tax at source) is amended by striking out “r” at the end of paragraph (6) and inserting in lieu thereof “; or”, by striking out the period at the end of paragraph (12) and inserting in lieu thereof “; or”, by striking out the period at the end of paragraph (15) and inserting in lieu thereof “; or”, and by adding after paragraph (15) the following new paragraph: “(16) (A) as tips in any medium other than cash; “(B) as cash tips to an employee in any calendar month in the course of his employment by an employer unless the amount of such cash tips is $20 or more.” (3) Subsection (a) of section 3402 of such Code (relating to income tax collected at source) is amended by striking out “subsection (j)” and inserting in lieu thereof “subsections (j) and (k)”. (4) Section 3402(h)(3) of such Code (relating to income tax withholding on basis of average wages) is amended by inserting after “quarter” the first place it appears the following: “(and, in the case of tips referred to in subsection (k), within 30 days thereafter)”. (5) Section 3402 of such Code is further amended by adding at the end thereof the following new subsection: “(k) Tips.— In the case of tips which constitute wages, subsection (a) shall be applicable only to such tips as are included in a written statement furnished to the employer pursuant to section 6053(a), and only to the extent that the tax can be deducted and withheld by the employer, at or after the time such statement is so furnished and before the close of the calendar year in which such statement is furnished, from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer for the purpose of such deduction and withholding) as are under the control of the employer; and an employer who is furnished by an employee a written statement of tips (received in a calendar month) pursuant to section 6053(a) to which paragraph (16)(B) of section 3401(a) is applicable may deduct and withhold the tax with respect to such tips from any wages of the employee (excluding tips) under his control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his employment by such employer is less than $20. Such tax shall not at any time be deducted and withheld in an amount which exceeds the aggregate of such wages and funds (including funds turned over under section 3102(c)(2)) minus any tax required by section 3102(a) to be collected from such wages and funds.” (e) (1) Section 6051(a) of such Code (relating to receipts for employees) is amended by adding at the end thereof the following new sentence: “In the case of tips received by an employee in the course of his employment, the amounts required to be shown by paragraphs (3) and (5) shall include only such tips as are included in statements furnished to the employer pursuant to section 6053(a).” (2) (A) Subpart C of part III of subchapter A of chapter 61 of such Code (relating to information regarding wages paid employees) is amended by adding at the end thereof the following new section: “SEC. 6053. REPORTING OF TIPS. “(a) Reports by Employees.— Every employee who, in the course of his employment by an employer, receives in any calendar month tips which are wages (as defined in section 3121(a) or section 3401(a)) shall report all such tips in one or more written statements furnished to his employer on or before the 10th day following such month. Such 79 Stat. 385statements shall be furnished by the employee under such regulations, at such other times before such 10th day, and in such form and manner, as may be prescribed by the Secretary or his delegate. “(b) Statements Furnished by Employers.— If the tax imposed by section 3101 with respect to tips reported by an employee pursuant to subsection (a) exceeds the tax which can be collected by the employer pursuant to section 3102, the employer shall furnish to the employee a written statement showing the amount of such excess. The statement required to be furnished pursuant to this subsection shall be furnished at such time, shall contain such other information, and shall be in such form as the Secretary or his delegate may by regulations prescribe. When required by such regulations, a duplicate of any such statement shall be filed with the Secretary or his delegate.” (B) Section 6652(b) of such Code (relating to failure to file information returns) is amended by inserting after “income tax withheld) the following: “and in the case of each failure to furnish a statement required by section 6053(b)(relating to statements furnished by employers with respect to tips),”. (C) Section 6674 of such Code (relating to fraudulent statement or failure to furnish statement to employee) is amended by striking out “6051” each place it appears and inserting in lieu thereof “6051 or 6053(b)”. (D) The table of sections for such subpart C is amended by adding at the end thereof the following: “Sec. 6053. Reporting of tips.” (3) Section 6652 of such Code (relating to failure to file certain information returns) is amended by redesignating subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection: “(c) Failure To Report Tips.— In the case of failure by an employee to report to his employer on the date and in the manner prescribed therefor any amount of tips required to be so reported by section 6053(a) which are wages (as defined in section 3121(a)), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be paid by the employee, in addition to the tax imposed by section 3101 with respect to the amount of tips which he so failed to report, an amount equal to 50 percent of such tax,” (f) The amendments made by this section shall apply only with respect to tips received by employees after 1965.