The Reporting of Tips
The reporting of tips by employees
Employees who receive tips (such as employees who work in bars, restaurants and hotels) are required to report those tips like they do any other income. To report the tips they receive directly or indirectly in the course of their duties, they must complete the Register and Statement of Tips (form TP-1019.4-V), or an equivalent document, and submit it to their employer at the end of each pay period.
By filing their statement of tips, employees ensure that they will receive, like other workers, employment-related benefits based on their total remuneration (basic salary or wages, plus tips).
An employer who refuses to receive an employee's written statement is liable to a penalty of $100.
Employer's statement of tips and tippable sales
Employers need the statement of tips from their employees to
- file their employer statement;
- allocate tips, where applicable; and
- calculate their source deductions and employer contributions.
Form TP-1086.R.1-V, Employer's Statement of Tips and Tippable Sales, must be filed annually for employees who carry out their duties in a regulated establishment in the restaurant and hotel sector. A separate form must be completed for each establishment.
The employer's statement must be submitted to Revenu Québec with the Summary of Source Deductions and Employer Contributions (form RLZ-1.S-V) by the last day of February of the year following the calendar year concerned. Otherwise, the employer is liable to penalties.
Allocation of tips
Where the amount of tips reported by an employee is less than 8% of the employee's sales (excluding taxes), the employer is required to allocate an amount as tips to the employee. The amount represents the amount needed to bring the total tips reported up to the minimum tip rate of 8% on the employee's sales.
For example, if an employee reports tips equal to 6% of his or her sales, the employer has to allocate an additional amount equal to 2% of the employee's sales, to bring total amount of tips reported to 8%.
The amount to be allocated must be determined on the basis of the percentage of tips reported by the employee before the employer distributes any tips to other employees.
The 8% allocation rate may be reduced further to a request from the employer or the majority of an establishment's employees (if the employer refuses to make the request). Form TP-42.15-V, Request for a Reduction in the Allocation Rate, or an equivalent document, can be used to make the request.
Any employer who fails to allocate tips is liable to a penalty equal to 50% of the amount not allocated.
Tip allocation does not apply to certain employees (such as delivery persons, doormen and porters).
Provincial source deductions and contributions
In calculating the source deduction of Québec income tax and the provincial contributions and premiums, employers have to add to the basic salary or wages they pay to their employees, all reported tips and any allocated tips. Note that allocated tips do not need to be included in the calculation of the Québec parental insurance plan premium.
Refundable tax credit
An employer may be eligible for a refundable tax credit. The credit is designed to provide compensation to the employer for the additional payroll taxes the employer is required to pay. Qualified expenditures include only the portion of the employer contributions attributable to tips. To claim the credit, the employer must file the appropriate form below with the income tax return:
- form TP-1029.8.33.13-V, Tax Credit for the Reporting of Tips, if the employer is an individual who operates a business or an individual who is a member of a partnership that operates a business;
- form CO-1029.8.33.13, Crédit d'impôt relatif à la déclaration des pourboires, if the employer's business is a corporation.
For more information, refer to brochure IN-250-V, Tax Measures Respecting Tips.