IRM 4.23, Employment Tax, serves as the foundation for addressing consistent administration of employment taxes by various IRS functions involving the following taxes:

Another good source of information on employment taxes is Publication 4268, ITG Employment Tax Guide (ver 10/04)

ITG Specialists should review the IRS Policy Statements that govern the Employment Tax Program in IRM 1.2.1 and become familiar with them.

The Service administers the employment taxes imposed by Chapters 21 through 24 of the Internal Revenue Code and the self-employment taxes imposed by Chapter 2. An important phase of administration of employment taxes, including the self-employment tax, is interpreting the sections of the Code applicable to these taxes, that is, issuing rulings and technical advice that clarify the intent of these sections.

Technical questions arising in employment tax cases involving the interpretation and application of tax laws, regulations, or other precedents published by the ITG Headquarters to a specific set of facts should be referred to the ITG Headquarters.

Requests for technical advice must include:

Rev. Proc. 2007-4 and Rev. Proc. 2007-5, (revised annually) provide procedures to request private letter rulings and technical advice, etc. See IRM 4.88.1.14.

The Classification Settlement Program (CSP) establishes procedures under an optional classification settlement program that will allow Indian tribal governments and ITG Specialists to resolve worker classification cases as early in the administrative process as possible. See IRM 4.23.6, Classification Settlement Program.

Employment tax returns do not contain information that would provide a basis for classifying returns for examination potential. Independent selection of returns should be based on known or probable areas of non-compliance.

The examination work papers and reports provide the basis for the decisions reached by the employment tax examiner. Only on the basis of the material in the work papers can a reviewer determine if the examination was complete and correct. The work papers should include:

ITG Specialists make determinations for FICA tax liability. Three factors must be present for FICA tax liability:

Under IRC section 6205, an employer who makes or has made an under-collection or an underpayment of employee taxes (FICA/RRTA) or income tax (withholding), may make interest-free payments of the tax due when certain conditions are met. This provision does not apply to FUTA. IRC section 6205 provisions are applicable to per capita withholding assessments made pursuant to IRC section 3402(r), as well as certain back-up withholding assessments under IRC section 3406.

Under IRC Section 3509, if an employer fails to deduct and withhold any income tax or employee's share of FICA tax by reason of treating employees as independent contractors, the employer may be entitled to reduced rates for determining the employer's employment tax liability. The employer pays the full amount of the employer's share of FICA and FUTA taxes. However, IRC Section 3509 provides reduced rates for the employer's liability for the employee's share of FICA and income tax. Different rate reductions apply depending on whether the employer filed information returns with respect to the workers. This reduction applies unless the employer intentionally disregarded the requirements to deduct and withhold FICA tax or income tax, or unless the employer deducted and withheld income tax but not FICA tax.

When an ITG Specialist discovers that a taxpayer has failed to file required Federal tax returns, he/she will:

In accord with Policy Statement P-4-103, after employment tax has been assessed as a result of an examination action, the taxpayer will generally be required to pay the assessment and file a claim for refund before receiving any further consideration of the case. However, other circumstances may arise to allow for a claim for abatement to be considered on its merits.

The enactment of Section 166 of the Community Renewal Tax Relief Act of 2000 (Public Law 106-554, codified as IRC section 3306(c)(7)) changed how FUTA applies to Indian tribal governments. IRS Announcement 2001-16 was written to provide guidance to federally recognized Indian tribal governments about their Federal Unemployment Tax Act obligations for 2000. See Exhibit 4.88.1-1Announcement 2001-16.

For services rendered after December 20, 2000, federally recognized Indian tribal governments are exempt from FUTA. This includes any subdivision, subsidiary, or wholly owned business enterprise of the tribal government. Instead, an Indian tribal government may elect to make contributions to the State unemployment fund as if services by its employees were employment under FUTA, or it may make payments in lieu of the contributions in amounts equal to the unemployment benefits attributable under the State law to such service. A separate election may be made for any subdivision, subsidiary, or business enterprise wholly owned by the tribal government.

To ensure proper determination of FUTA liability, the State will need to advise IRS ITG and the Department of Labor of any determination it has made concerning a tribe's failure to make required payments or post a required bond and whether the tribe has subsequently satisfied these liabilities.

If a tribe fails to make payments required (including assessments of interest and penalty) within 90 days of final notice of delinquency, the State will immediately notify separately:

IRS Indian Tribal Governments
SE:T:GE:ITG
1111 Constitution Avenue, N.W.
Washington, DC 20224

Generally, service performed by employees of tribal governments or tribal business enterprises constitutes employment and their wages are subject to federal employment taxes. Payments to tribal and non-tribal employees are to be reported on Form W-2.

The Internal Revenue Code provides that for purposes of FICA, FUTA, and federal income tax withholding, the term " wages" means all payments received for "employment" with certain specified exceptions. Therefore, unless payments to employees are excepted from the term "wages" or the services performed by the employee are excepted from the term "employment" , such payments will be subject to FICA, FUTA, and federal income tax withholding. See Exhibit 4.88.1-1, Announcement 2001-16, for exceptions relating to Indian tribal entities and FUTA.

Questions often arise concerning services performed for the tribe on tribal land by a tribal member who lives on the reservation. Individual tribal members are citizens of the United States and are subject to Federal income tax, unless specifically exempted by a treaty or statute (see Rev. Rul. 67-284, 1967-2 C.B. 55).Note: the rules for state income tax of tribal members may differ.

A limited exception from employment tax is found in IRC section 7873. Section 7873 provides that no employment tax shall be imposed on remuneration paid for services performed in a fishing rights-related activity of an Indian tribe by a member of such tribe for another member of such tribe or for a qualified Indian entity.

There is a narrow exception for salaries paid to tribal council members for services performed by them as council members. Rev. Rul. 59-354,1959-2 C.B. 24, holds that while these amounts are includible in the council members' gross income, they do not constitute wages for purposes of FICA, FUTA, and income tax withholding.

Rev. Rul. 59-354 further states that although amounts paid to tribal council members are not subject to employment taxes, services performed by other salaried employees of Indian tribal councils and by the employees of tribal business enterprises constitute employment and their wages are subject to federal employment taxes.

The tribe may make payments to multiple non-employees (e.g., service providers, rents, etc.) during the course of any given year. When payments to a non-employee of fixed or determinable gains, profits and income aggregate to $600 or more, a Form 1099 is required pursuant to IRC section 6041.

IRM 4.10.5, Required Filing Checks, covers reportable payments to be included on the Form 1099. See IRM 4.10.5.6.

Backup withholding provisions of IRC section 3406 are applicable to Indian tribal governments. See relevant sections of IRM 4.23.8.13 and IRM 20.1.7.10. These sections include backup withholding requirements for the tribe when the payee fails to supply its Taxpayer Identification Number (TIN) prior to the payment, and requirements when notified by the Service that a payee is subject to backup withholding.

Form W-9 may be utilized to secure the TIN.

The backup withholding rate is 28 percent of the applicable payments.

Treasury Regulation Section 31.3406 is helpful in determining when backup withholding applies. Applicable penalties under IRC section 6721, failure to file correct information returns, and IRC 6722, failure to furnish correct payee statements, are addressed under Treasury Regulations Sections 301.6721 and 301.6722.

IRM 20.1.4.5 provides information on Form 945, including deposit requirements. Form 945 is to be used for reporting required payments for backup withholding. Form 945 deposit requirements and federal tax deposit penalty provisions parallel provisions for the Form 941.

Publication 15, Circular E provides a good reference for the tribes on deposit requirements.

Beginning January 1, 2006 certain qualifying employers with no tax liability/deposit requirement exceeding $1,000 a year may qualify for annual filing and payment rather than making quarterly deposits. See IRM 4.23.8 , Determining Employment Tax Liability. Form 944 Employer's ANNUAL Employment Tax Return.

There are provisions under IRC section 3402(d) which allow for abatement of the income tax portion of:

Procedures to use in the abatement process, including use of Form 4669 and Form 4670, are included in IRM 4.23.8.4 and IRM 4.23.8.13 This involves the attestation of the payee as to having filed the subject return and paid the resulting liability.

When the Form 4669 and Form 4670 are secured prior to closing the examination, the applicable procedures are to be utilized at that time.

The intent of Indian Gaming Regulatory Act (IGRA) is to:

Since IGRA's passage in 1988, the tribes and states have successfully negotiated hundreds of tribal-state gaming compacts. Gaming provides significant revenues for many Indian tribes.

The term "gaming" has been divided by IGRA into three classes:

All Tribal Governments conducting or sponsoring gaming activities need to be aware of the Federal requirements for income tax, employment tax and excise tax. See Publication 3908, Gaming Tax Law for Indian Tribal Governments. This publication is designed to provide basic information to assist in meeting that need.

As noted above in IRM 4.88.1.4 , the structure and ownership of the tribal gaming operation have an important impact on the taxability of the income.

This subsection explains the recordkeeping responsibilities of a tribal gaming operation with regard to gaming income, payouts, and expenses.

Tribal governments that are conducting gaming operations generate a substantial amount of income, primarily in the form of cash. The cash passes through many hands, which could result in numerous abuses. One of Congress's concerns was the potential for criminal abuse. As a result, IGRA provides the framework to handle the necessary recordkeeping when a tribe is involved in either Class II or Class III gaming.

Whether the tribe has hired an operator to run its gaming operation, or it is handling the gaming operation itself, they must follow the regulations issued by the National Indian Gaming Commission (NIGC) that cover the Minimum Internal Control Standards (MICS) for Indian Gaming. These standards are applicable if they are more stringent than the standards included in a tribal-state compact. However, if the tribal-state compact is more stringent, then the compact standards apply.

The NIGC Regulations cover the internal controls needed for all Class II and Class III gaming operations.

Generally, gaming operations existing as of March 31, 1999 were allowed until February 4, 2000 to comply with the minimum standards, with the potential for a six-month extension. Gaming operations are required to be in compliance at the time operations commence. The tribal entity must also have an independent Certified Public Accountant verify that the Internal Control Systems that are in place are in compliance with the Minimum Internal Control Standards of the NIGC's regulation, or with the tribal-state compact (25 CFR 542.3). Failure to meet these standards may result in temporary closure and/or civil fines.

The NIGC Regulations can be obtained from the NIGC, or can be accessed from the NIGC web site at http://www.doi.gov/nigc/laws.htm .

For the Memorandum of Understanding defining responsibilities between ITG and NIGC See See Exhibit 4.88.1-2.

This subsection describes the common filing requirements that relate to gaming activities conducted by tribal entities. Tribal entities conducting gaming activities generally handle and prepare the following forms:
Forms Generally Filed

The use of a promoter or contractor to operate gaming for a tribal government will not relieve the tribe of its responsibility to file the appropriate forms.

In 1970, Congress enacted the Bank Secrecy Act. This far-reaching act instituted rules and regulations for the reporting of currency transactions of greater than $10,000 and for certain identification and recordkeeping requirements. The Act was amended in 1985 to include casinos with gross annual gaming revenue (GAGR) in excess of $1,000,000. This coverage was extended to Indian casino operations in August 1996.

Due to the cash intensive nature of gaming activity and the huge volume of wagering throughout the United States, casinos find themselves dealing with large numbers of individuals and massive amounts of currency. The information in this section is intended to provide a basic understanding of the BSA and how to comply with its provisions.

Casinos and card rooms are designated as financial institutions subject to the requirements of the BSA if:

FinCEN Form 103, Currency Transaction Report by Casinos (CTRC) is used to report transactions. This form must be filed with the Service's Detroit Computing Center by the fifteenth calendar day after the day of the transaction.

A report is required for a single or multiple transactions over $10,000.

The casino must have knowledge that a multiple transaction exceeded $10,000 in a gaming day and are by, or on behalf of, one individual. The casino is deemed to have knowledge if any employee, proprietor, officer, director or partner has knowledge the transactions occurred. It is not necessary to have personally observed the transactions; it can also be acquired from examining books, records, logs, computer files, etc.

In order to properly file a CTRC, the casino is required to secure certain information from the customer (including foreign nationals) BEFORE concluding the transaction. The information includes:

Customer identification required by the CTRC must be verified using appropriate forms of identification:

There are extensive recordkeeping requirements for financial institutions, and additional ones for casinos. A complete list of requirements can be found in 31 CFR 103. See 31 CFR 103.36 for recordkeeping requirements specifically for casinos.

One of the important requirements concerns deposit of funds, account opened, or credit extended. The casino must secure and maintain the name, permanent address, and Social Security number for each person having a financial interest in the account. The information must be verified by examining a driver's license or any other form of identification that is acceptable within the banking community for cashing checks of non-depositors. In the case of an alien or non-resident of the United States, verification must be made by using a passport, alien identification card, or other official document corroborating nationality or residency.

Other key records include:

Casinos are required to develop and implement a reasonably designed, written program to monitor compliance with the BSA. At a minimum, the plan must include:

For casinos with automated systems, the casino must use the programs to aid in assuring compliance.

Casinos have a certain vulnerability to potential money laundering schemes caused by the cash intensive nature of the games. The Bank Secrecy Act was designed to create an audit trail to help minimize illicit financial transactions. Suspicious activities often involve structuring to avoid recordkeeping and reporting thresholds.

Structuring occurs when a person, alone or with others, conducts or attempts to conduct one or more currency transactions in amounts of $10,000 or less in order to evade the reporting requirements of the BSA. Casinos should be aware that both customers and employees may be involved.

Casinos are required to report all suspicious transactions that involve or aggregate to at least $5,000 in funds or other assets that it knows, suspects or has reason to suspect is relevant to a possible violation. Possible violations that involve less than $5,000 may be reported on a voluntary basis. FinCEN Form 102 is used to file a Suspicious Activity Report by Casinos (SARC). FinCEN Form 102a provides detailed instructions on when and how to file a report. FinCEN has issued guidance on Suspicious Activity Reporting and preparation, including SARC narrative examples.

Currency transactions in other operational aspects of a casino complex may be subject to other reporting requirements:

In December 1992, the Department of Interior issued "Guidelines to Govern the Review and Approval of Per Capita Distribution Plans" (Guidelines). The guidelines were revised, effective March 17, 2000. These guidelines set forth the procedures regarding the submission, review, and approval of tribal revenue allocation plans or ordinances relating to the distribution of net revenues from a gaming activity. Title 25, Chapter 1, Part 290 contains the revised guidelines. Under the Guidelines,

The Guidelines define "per capita " payments as those payments made or distributed to all members of the tribe or to identified groups of members which are paid directly from the net revenues of any gaming activity.

Per capita payments do not include benefits for special purposes or programs, such as social welfare, medical assistance, or education. Although a tribal member may receive benefits from net revenue for social welfare, medical assistance, or education, the tribe's designation of these payments is not determinative of their tax status.

Under the general welfare doctrine, certain need-based benefits are not taxable. Although there is no express statutory exclusion for a welfare benefit, government disbursements promoting the general welfare of the tribe are not taxable. Thus, a tribal member may receive non-taxable general welfare payments from the tribe. Bannon v. Commissioner , 99 T.C. 59 (1992); Bailey v. Commissioner, 88 T.C. 1293 (1987). See also Rev. Rul. 2005-46, Rev. Rul. 2005-2 C.B.120 (Payments to individuals by governmental units under legislatively provided social benefit programs for the promotion of the general welfare are excluded from gross income under the general welfare extension.

To qualify under the general welfare exclusion, payments must:

Bailey summarizes previous revenue rulings by stating that grants received under social welfare programs that did not require recipients to establish individual need have not qualified for tax exempt status under the general welfare doctrine. Rev. Rul. 76-395, 1976-2 C.B. 16 and Rev. Rul. 76-75, 1976-1 C.B. 14 can be reviewed for further guidance. A key consideration is that the general welfare doctrine requires an individual to establish need.

The Indian Gaming Regulatory Act mandates that the gaming revenue distributions are to be taken into account in computing the income tax of the member. See 25 U.S.C. section 2710(b)(3)(D). For those who receive distributions outright, the year of income inclusion is the year of receipt. See Rev. Rul. 67-284.

Per capita payments and other distributions are generally made in cash, but also may be in kind, (e.g., services, property, or relief of debt). Identifying the initial source of funds used for the distributions is an important aspect of the reporting and withholding requirements.

Unless specifically exempt from taxation, the amounts that make up the distributions are taxable and subject to the requirements of filing Forms 1099. A distribution could be derived from many sources. Examples include the following:

All of these payments would require the tribe to prepare a Form 1099 when a payment was made to the tribal member. (Exceptions for nontaxable distributions are discussed below.) Taxable distributions must be included on an individual's income tax return.

If property, services, or relief of debt is received, the tribal member must include the fair market value of the item in gross income. It is only the amount distributed from the net revenues of Class II or III gaming activity, conducted or licensed by such tribe, that is subject to withholding under IRC section 3402(r) . Withholding provisions are discussed below.

TRDAs provide several benefits to the employer:

TRDAs provide benefits to employees, for example:

TRDAs provide benefits to the IRS, for example:

Following are the requirements for complying with the rules regarding a TRDA with respect to employee and employer participation.

Depending on the occupational categories and the employer's business practices, tips can be measured in different ways:

The employer will review annually, on a calendar year basis, the tip rates assigned to its occupational categories. In addition, the employer may review its occupational categories to ensure that new categories are added and that eliminated categories are deleted.

If the employer believes that a revision of one or more tip rates or occupational categories is appropriate, the employer will submit the revisions to ITG by September 30. If the employer does not submit a request to revise tip rates, then the existing tip rates will be considered the submitted rates by the employer. The Specialist can initiate a rate review to determine whether the existing rates need revision.

ITG will review the proposed rates and notify the employer in writing of its approval or disapproval by November 30. If the proposed rate(s) are not approved, the existing rate(s) will continue until no later than the last day of the following February. If the employer and ITG are unable to agree upon the rate(s) by the last day of the following February, then the agreement will terminate.

New agreed upon rates become effective January 1 of the calendar year, or the first day of the month following the date the employer and ITG agree upon the revised rates.

See IRM 4.88.1.8.16.

The employer can terminate the agreement at anytime.

The Service can terminate the agreement if:

The termination must be in writing and is effective on the first day of the calendar quarter following the date of notice.

The ITG Director has sole authority to terminate a TRDA on behalf of the Service.

The Gaming Industry Tip Compliance Agreement (GITCA) is designed specifically to address concerns of the gaming industry relating to tip income and to reduce disputes under IRC section 3121(q). See Exhibit 4.88.1-9or IRC 2003-35 Exhibit A for a model GITCA. The following requirements apply to rules regarding employee and employer participation in a GITCA.

At least 75 percent of the eligible employees in tipped occupational categories must sign a Model Gaming Employee Tip Reporting Agreement indicating participation in the GITCA.

If participation falls below 75%, the Service and employer will meet to discuss the decline in the participation rate and measures the employer may take to increase the participation rate.

The agreement will not be terminated if the employer undertakes good faith consultations with the Service and is not in breach of its obligations under Section V.A. of the GITCA.

An "eligible employee" is an individual who performs a job in an occupational category described in Appendix A of the GITCA and who regularly and routinely receives tips, directly or indirectly of at least $20 per month during his/her course of employment.

A "participating employee" is required to have filed federal tax returns for the three taxable years that precede the effective date of the GITCA. The employee must also continue to report tips at or above the tip rates established in the agreement and file and report those tips on timely filed tax returns.

The employer agrees to encourage all of its eligible employees to participate in the program and to sign the Model Gaming Employee Tip Reporting Agreement. See Exhibit 4.88.1-9.

The agreements will be kept on file and made available to the Service upon request for at least the period of limitation on assessment of employment tax while the Agreement is in effect.

The employer shall make tax withholding based upon tips reported, as required by law.

All reported tips must be included on IRS Forms W-2.

The employer acknowledges that the Service has the authority to secure the information necessary for the Service to develop the tip rates of nonparticipating employees.

The employer shall maintain the following records for each eligible employee:

The employer shall maintain the following gaming establishment records:

If the occupational categories set forth in the GITCA include food or beverage servers, the employer shall maintain gross receipts subject to food or beverage tipping, and aggregate receipts showing charged tips.

The employer will maintain any other records relevant to determining tip rates, as may be required by other governmental agencies.

The employer must maintain these records for at least 4 years after the April 15 following the calendar year to which the records relate.

The employer will furnish to the ITG Tip Program Coordinator an annual report showing:

The report is due on or before March 31 for the preceding calendar year or any portion thereof during which the GITCA was in effect.

If the occupational categories listed in Appendix A include employees of large food and beverage establishments as defined in IRC section 6053(c)(4), then the employer shall provide annually to the Service the following information:

In addition, the employer shall include on the Forms W-2 issued to nonparticipating employees tips allocated pursuant to section 6053 of the Code. No such tip allocation shall be required on Forms W-2 issued to participating employees.

Accordingly, no preparation and filing of Form 8027 by the employer shall be required with respect to participating employees. The information is due on or before the Form 8027 filing date. If the information in section 3 (a-e) above is provided, and Forms W-2 are filed, the employer shall have been deemed to satisfy the requirement for filing Form 8027.

The Service may not examine a participating employee's tip income for any taxable year that begins after the effective date of the agreement provided that each of the following conditions are met:

Refer to Section VI(B) & (C) of Rev. Proc. 2003-35 for additional considerations when:

During any taxable year during which the GITCA is in effect:

At the Service's discretion, it may continue any ongoing examination of the employer begun before the effective date of the agreement.

The parties should establish the applicable tip rates as follows below.

Employees Who Pool Tips:

Other Tipped Employees--Specified Occupational Categories.

In general, the applicable tip rates and occupational categories established by the GITCA shall remain in effect for the term of the agreement, unless otherwise modified following (a) or (b) below:

The employer may request that the Service agree to a modification in the relevant Tip Rate of an affected Participating Employee within an Occupational Category (e.g., an outlet or shift) that is appropriate in amount and duration, which consent shall not be unreasonably withheld.

The GITCA is effective on the date agreed upon in the body of the agreement and will be in effect for up to three years. (If necessary, such as with a new business, the term may be less than three years if agreed upon by both parties.)

Beginning not later than six months prior to the termination date of the agreement, ITG and the employer shall begin discussions regarding any appropriate revisions to the GITCA, including any appropriate revisions to the tip rates described in Section VIII.

In the event that the Service and the employer have not reached final agreement on the terms and conditions of a renewal Agreement, the parties may, by mutual agreement, extend the current agreement for an appropriate time to finalize and execute a renewal Agreement.

Neither the employer's nor the Service's decisions regarding renewal of agreements are subject to review.

If employee participation falls below 75 percent of eligible employees, the Service and employer shall meet to discuss the cause of the decline and measures to increase it. At the meetings, the employer shall provide information for:

If the employer undertakes good faith consultations with the Service and the employer is not in breach of its obligations under Section V.A. of Rev. Proc. 2003-35, the Service may not terminate the agreement.

If the employer fails to undertake good faith consultations with the Service or the employer is in breach of its obligations under Section V.A. of Rev. Proc. 2003-35, the Service may terminate the agreement.

The Service may also terminate the agreement if participation falls below 50 percent of the eligible employees. Termination shall be effective with the first calendar quarter that commences after the 60-day period for notice to the employer.

The agreement may be terminated upon the joint agreement of the employer and the Service, without the consent of any participating employee. The effective date of termination shall be as agreed to by the employer and the Service.

If either party fails to comply with any material provision of the agreement, the non-defaulting party, at its option, may terminate this agreement by giving written notice of termination to the other party. Termination of the agreement shall be effective upon receipt of the notice by the other party.

If the agreement is terminated pursuant to the GITCA's terms, the mutual obligations of the parties shall remain in effect through the effective date of termination. The agreements set forth in Sections VI and VII of Rev. Proc. 2003-35 shall survive termination with respect to taxable periods (or portion thereof) occurring prior to the effective date of termination.

The agreement must be signed by the tribal representative who has been delegated this authority by the tribal government.

Indian Tribal Government (ITG) Managers have the authority to sign on behalf of the Service per Delegation Order 4-34, Gaming Tip Compliance Agreements. See IRM 1.2.2.4.5.

Two original agreements must be signed. The tribal government retains one copy and the other original is kept in the tip case file.

The tip case file (containing the original signed agreement) is forwarded to CPM for review and maintenance of the historical file. No historic information will be maintained at the group level.

Initial tip rates, and requests to revise existing tip rates, require a validation review by the ITG specialist. Of concern to the Specialist is:

The tribal gaming establishment can use different methodologies to determine tip rates. Tip rates should be determined using statistically valid sampling methods that can be based on:

The Tip Rate Determination Agreement (TRDA) and GITCA require the employer to retain for each occupational category all records of data used to determine the tip rates. These records should be requested and reviewed by the Specialist.

Tip rate reviews initiated by the Specialist should be done using statistically valid sampling techniques. In some cases the use of a statistically qualified Computer Audit Specialist (CAS) may be necessary.

The internal and accounting controls insure that the tip income under any tip rate methodology is accurately and correctly reported. A copy of the written internal and accounting controls should be obtained and reviewed. In some cases it may be appropriate to test, on a sample basis, the existing controls.

Tip rates that are based on an actual or a pooling method require a number of internal controls to ensure that what the employee reports to the employer is correct and accurate. The use of a locked toke box for each employee is better than having the employee place tips in their pocket. An example of some of the controls associated with locked toke boxes would be:

Some factors that should be considered when reviewing tip rates are:

Rate reviews will be documented in the specialist's work papers. The specialist's findings and the associated work papers will be submitted to the group manager for review and approval or disapproval.

After the Specialist and tribe agree on the rates and occupational categories included in the tip agreement, the draft agreement and supporting documentation should be sent to CPM for pre-review (E-mailing the information is acceptable). CPM Review will concur or work with the Specialist to make the suggested changes.

When the final agreement is presented to the tribe for signature, an appropriate amount of time should be allowed and communicated to the tribe. If the signed agreement has not been received within that time frame, consideration should be given to issuing a declination letter.

Once the agreement is secured the completed tip case file (with the original signed agreement) will be closed to CPM.

The Indian Tribal Governments (ITG) office created the position of ITG Tip Program Coordinator (Tip Coordinator) to work directly with the tribes on issues that arise after both parties have entered into a tip agreement. The responsibility for this program is placed with the Compliance and Program Management (CPM) staff.

The goal of the Tip Coordinator is to ensure that all parties (the tribes, their employees and the Service) adhere to the agreements. This generally involves monitoring annual reports required by the tip agreements, as well as overseeing activities related to employee audits.

The role of the Tip Coordinator in no way interferes with the duties and responsibilities of the ITG Specialists. Any requests for assistance from the tribes that cannot be adequately handled by the coordinator will be referred to the appropriate field group for assignment to a Specialist.

Upon receiving a new agreement, the Tip Coordinator will send a letter to the tribe to:

The Tip Coordinator will record for the files information including (but not limited to) the following:

The above information should be evident to the Tip Coordinator in the tip case file. By maintaining this information, the Tip Coordinator will know whether or not to expect/request certain information.

Two examples follow:

The ITG Specialist in the field has more direct contact and knowledge of the changes that may occur with the tribes business operations. The Specialist should notify the Tip Coordinator if any situation changes that would affect the tribes tip agreement including their annual reporting requirements.

Such examples include the following: