Hi B,

You could be referring to 'estimated' or 'distributed' tips.

In some personal service businesses, tips are paid to a service provider (stylist, barber, waiter, doorman, cabbie, etc) as a customary matter, in cash, directly from the customer. In these cases, (mostly) tips are not reflected in the books of the business itself, and reporting is left to the employee. The employee reports may be compiled and carried as 'allocated' for withholding purposes, etc.

In some, tips are included as a part of the guest's bill by the business (mandatory gratuity, etc.). In some 'tips' are collected and 'pooled' (tip jar, cash bag, etc.) and later distributed among all eligible employees. (waiters, cooks, dishwashers, busboys, etc.) The business records should reflect actual dollar amounts in these cases, and may not reflect cash tips to individual employees.

In cases where the employee does not report tip income, it is up to the employer to determine whether they will estimate tip income for withholding. If they do not, the IRS may have some scathing comments to make, if not actual penalties to levy.

Look at the www.irs.gov website for rules and reporting documents.

Good Luck!

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