Calculation of the Amount to Be Allocated

The amount to be allocated as tips to an employee for a given pay period is the result of the following calculation:

minus

  • the amount of tips received by the employee on tippable sales during the period (before tips are shared with other employees under a tip-sharing arrangement). Note that tips received by the employee from other employees under a tip-sharing arrangement are not taken into account in this calculation.

If the result of this calculation is negative, no amount is to be allocated as tips to the employee for the pay period in question.

Example of a situation where an amount must be allocated as tips

In this example, the employer must allocate an amount as tips for the pay period in question since, even though the amount of tips reported by the employee ($80) is equal to 8% of the employee's tippable sales (This link will open a new window), the amount received by the employee as tips on tippable sales ($70) is less than 8% of the employee's sales ($1,000 × 8% = $80).

Amount of tippable sales (column A of form TP-1019.4-V) $1,000
Tips received from customers on these sales (column B of form TP-1019.4-V) $70
Tips remitted to other employees $10
Tips retained by the employee = $60
Tips received from other employees that are not related to the employee's sales + $20
Tips, received directly or indirectly, reported to the employer and included in the calculation of source deductions and contributions = $80
Calculation of amount to be allocated
8% of tippable sales (8% × $1,000) $80
Minus tips received from customers on these sales (column B of form TP-1019.4-V) $70
Total = $10
Amount to be allocated $10

Example of a situation where no amount must be allocated as tips

In this example, the employer is not required to allocate an amount as tips for the pay period in question since, even though the amount of tips reported by the employee ($70) is less than 8% of the employee's tippable sales, the amount received by the employee as tips on tippable sales ($150) is more than 8% of the employee's sales ($1,000 × 8% = $80).

Amount of tippable sales (column A of form TP-1019.4-V) $1,000
Tips received from customers on these sales (column B of form TP-1019.4-V) $150
Tips remitted to other employees $90
Tips retained by the employee = $60
Tips received from other employees that are not related to the employee's sales + $10
Tips, received directly or indirectly, reported to the employer and included in the calculation of source deductions and contributions = $70
Calculation of amount to be allocated
8% of tippable sales (8% × $1,000) $80
Minus tips received from customers on these sales (column B of form TP-1019.4-V) $150
Total = -$70
Amount to be allocated = $0
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