UNITED STATES MARINE CORPS MARINE CORPS COMMUNITY SERVICES POSTAL SERVICE CENTER BOX 8009 CHERRY POINT, NORTH CAROLINA

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1 UNITED STATES MARINE CORPS MARINE CORPS COMMUNITY SERVICES POSTAL SERVICE CENTER BOX 8009 CHERRY POINT, NORTH CAROLINA MCCSO 7420 MCCS MARINE CORPS COMMUNITY SERVICES ORDER From: Chief Executive Officer To: Distribution Subj: ELIGIBILITY, REPORTING AND DISTRIBUTION OF TIPS AND SERVICE CHARGES Ref: (a) DOD R (b) IRS Publication 531, 2012 Encl: (1) Examples of Calculations 1. Purpose. To publish information concerning the distribution and reporting of tips and service charges to eligible NAF employees. 2. Background. NAF employees in Crafts and Trades, and others as specifically designated by management, may receive tips directly from customers as cash, from debit/credit cards that are converted to cash, or may share in a tip pooling arrangement. These employees may also receive a portion of service charges which are added to a customer s bill by the facility, and are considered wages. This order will outline reporting requirements and eligibility. 3. Information. a. Receiving and Reporting Tips. Employees must record daily tips that they receive, by cash or from credit/debit cards on the tip reporting form provided at each location. The form includes all of the information required to complete IRS Form 4070, a monthly (or shorter period) log. Employees are encouraged to keep a copy of their daily tip logs for each month for their own files, see IRS form 4070A, Publication Samples of both forms are available for download at Enclosure (1) provides instruction methods of calculating the amounts of tips and service charges due and how and payment will be distributed.

2 (1) Although some facilities may have a tip jar, solicitation of tips is not permitted. Tip jars must be kept out of sight, and may not be displayed. Tips that are left in these jars, will be distributed among staff members, in accordance with the direction provided in enclosure (1) for tip pooling, and must also be recorded on the employee s daily tip sheet. (2) Support personnel who may receive a share of tips from an eligible staff member, are required to claim their share of the tips on the daily tip sheet. Note that the employee who is providing tips to another should not include the tips they provided to someone else in the amount reported on their own tip sheet. (3) Employees who receive tips in excess of $20.00 per month, whether directly or through a tip jar/pool, must complete the tip sheet provided at their workplace. The facility manager will forward the report to accounting to be processed through payroll, by the beginning of the next pay period. Tips are reported on the employees annual Federal Form W-2 and are subjected to taxes as appropriate. (4) Tips that are beneath the $20.00 reporting threshold in any month must be added to the total wages reported on the W- 2 on the employee s income tax return, by the employee. (5) Correctly reporting tips ensures that taxes are withheld appropriately and an accurate accounting of earnings is reported. The amount of earnings reported can impact the amount of benefits paid later for worker s comp, social security, or retirement; additionally, the increased income level may improve the employee s ability to obtain credit or financing. b. Receiving and Reporting Income from Service Charges. Some facilities include a service charge and/or a prescribed gratuity charge on the customer s bill. These service charges, less the house portion (the percentage determined by command direction for each facility that uses these charges) will be divided among the employees based on the number of work hours they contributed to the event. Service charges are not 2

3 considered tips, they are considered wages. The Income from service charges is paid to the employee through payroll and is reported as wages. c. Eligible Employees. Eligible employees are NAF employees in Crafts and Trades positions as designated below and also any other employee so designated by management. Managers are not eligible for tips or participation in the allocation of service charges/gratuities. Government ethics prohibit managers from accepting monetary gifts in excess of $20.00 per occasion; or a total that exceeds $50 in a calendar year from one source. Gifts are subject to reporting as income. (1) Food Service Worker: Any snack bar, delicatessen, club worker or employee who performs the duties/responsibilities of a NAF Crafts and Trades worker in the pay grade NA-02 (2) Wait Staff: Any snack bar, delicatessen, club worker or employee who performs the duties/responsibilities of a NAF Crafts and Trades worker in the pay grade NA-03 (3) Bartender: Any snack bar, delicatessen, club worker or employee who performs the duties/responsibilities of a NAF Crafts and Trades worker in the pay grade NA-04 (4) Cook Leader: Any snack bar, delicatessen, club worker or employee who performs the duties/responsibilities of a NAF Crafts and Trades worker in the pay grade NL-08 (5) Designated Employee: Any snack bar, delicatessen, club worker or employee who performs the duties/responsibilities working in the capacity of either a food service worker, wait staff, or bartender for a period of time not more than twentyfive percent of his/her weekly hourly production. (a) If designated by management and capable of performing as a bartender, a food service worker or wait staff may engage as a bartender, not including mixing spirits/liquor. (6) Hair Stylist: NAF Craft and Trades worker in pay grade NA-07 3

4 4. Action. a. Each facility will maintain records of tip reporting and will include all items on Federal form 4070-Employee s Report of Tips to Employer, which includes: facility name and cost center number, employee payroll number, employee s charged sales, cash tips received, credit and debit card tips received, a total of all tips paid out, time period when tips were received, employee signature, and date of signature. This income will be transferred to payroll and subsequently included in the employees annual Federal Form W-2. MIKE LARGENT DISTRIBUTION STATEMENT: Approved for electronic distribution. 4

5 Examples of Tip and Service Charge Methods of Calculation: Example 1: Banquet with Service Charges Three wait staff work a banquet paid for with a credit card. The banquet contract includes a service charge. The employee portion, or split, of the service charge for this event is $150. There are 8 total contact hours. Employee #1 and #2 worked 3 hours, employee #3 worked 2 hours. The amount of the service charge will be divided by the 8 contact hours. In this case, the $150 divided by eight will result in an hourly rate of $18.75 to be paid per hour to each employee. Employees# 1 & 2 will have earned $18.75 x 3= $56.25 and employee #3 will earn $ The employees will sign the tips sheet with the number of contact hours they contributed to the event. The contract and the tip sheet will be forwarded to accounting. Service charges are considered wages and will be paid and processed through payroll. Example 2: Individual Tips A waitress works lunch and dinner and handles her own cash tips. At the end of her shift she reconciles the drawer/till and has a member of management take all credit card tips, and convert them to cash for her. She then declares her cash tips and signs the tip sheet confirming her cash and credit card tips earned. The tip sheet is sent to accounting and processed through payroll for accounting purposes only. Example 3: Tip Pooling Three bartenders split one shift. Bartender #1 and Bartender #2 work three hours, a third bartender reports to work and bartender #1 checks out. The cash collected by Bartender #1 and Bartender #2 is divided evenly between the two. They collect $20 in cash tips and $20 in credit card tips. The supervisor prints a sales report, and splits the tips evenly for each bartender. They receive their credit card tips of $10 each in cash, and $10 each in cash. Total tips are $20 each. Bartenders #2 and #3 continue the shift and at 2300 bartender #2 checks out. They collect $30 in cash tips and $20 in credit card tips. The supervisor prints the sales report and Enclosure (1)

6 subtracts the amount of tips from the sales report printed earlier, to determine the amount of tips due bartender #2 and #3 which is now $15 in cash tips plus $10 in credit card tips each. At the end of the shift bartender #3 will close out the register and the supervisor will subtract the first two readings with cash and credit card tips from the closing report. This report indicates bartender #3 declares another $8 cash tips and $4 in credit card tips. The supervisor must report the following on the tip sheet: Name Date Tips Received Directly From Customers & Other Employees Credit & Debit Card Tips Paid to You Bartender #1 1/31/2013 $10 $10 Bartender #2 1/31/2013 $10 $10 Bartender #2 1/31/2013 $15 $10 Bartender #3 1/31/2013 $15 $10 Bartender #3 2/1/2013 $ 8 $4 Tips Paid Out to Other Employees Name of Employees to Whom You Paid Tips Totals $58 $44 2 Enclosure (1)