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Detroit City Limits | What's Going on in Detroit

03Jul

How Voluntary Turns Mandatory

Casinos in Detroit are filled with excitement. You have the gambling. You have the incredible food options, and the gambling, entertainment, and the gambling, exotic drinks, and the gambling, possible celebrity sightings, and of course, the gambling. My oh my the excitement. Did you ever stop and think about the hard working employees that work at the casinos that are there  to serve and help customers satisfy their intense need to risk their entire paycheck and savings to see if the the fruit will line up in a slot machine or if the cards will magically add up to twenty one? 

In particular, the bartenders and servers  deserve a tremendous amount of credit for the thankless work they do at the Detroit casinos. Some not familiar with the environment at the Detroit casinos may envision the bartenders and servers waiting on Mr. Joe Out-of-town in his favorite Hawaiian shirt, ordering food and drinks all hours of the day, and tipping as though he is spending Monopoly money. Sorry this is not Las Vegas, or Reno, heck it's not even Atlantic City.  This is quite the contrary. The typical customer at the casinos in Detroit is there to spend all their cash on gambling. They will spend money on dining because of necessity and they will consume alcohol to drown their sorrows from losing. Most of the time there will not be much left over to tip the bartenders and servers. Which leads me to............

Several years back, the Internal Revenue Service, implemented a program(with all good intentions), called GITCA. GITCA is the Gaming Industry Tip Compliance Agreement. The program is promoted as a partnership between gaming industry employers and its employees and the IRS and is currently used by the major casinos in Detroit. The purpose is to promote tip compliance by establishing an average tip rate for tipped employees in specified occupational categories, while easing administrative burdens. Participants in this voluntary program (remember that word voluntary) also are ensured to not be subject to IRS tip examinations. Sounds like a pretty good idea right? Sign me up! Well, I am not so sure about that. The problem is that the GITCA  rates run the risk of being calculated incorrectly without consideration of many variables and with very little input from employees. For example, it might not be taken into consideration how much time the servers and bartenders spend doing activities with no potential for tips, such as setting up, guest relations or working a shift that has very low tip potential. It seems the data is based on collusion between management and the IRS, with little or no input from the people doing the actual work. The GITCA tip rates established seemed to be based on the best case scenarios for tips and do not include all those variables which would have lowered them tremendously. The problem is, these hard working employees would pay tax on income that they did not actually receive. Now I think all these fine people agree that they owe their fair share in taxes. However, I don't think anyone wants to pay tax on income that did not actually receive. Not even the President would do that. 

It should be noted again that the GITCA tip program is voluntary and that during implementation and enrollment employees are advised continuously  that if they enroll in the program they will not be subject to IRS examination and if they do not, they run the risk of being, ahem, randomly audited. Randomly of course means without method or conscious decision and indiscriminately.  Statistical data provided by the IRS shows that the percentage of taxpayers that are randomly examined by the IRS in around the same income bracket as the servers and bartenders at the casinos at around .5%, or about 1 in every 200. I wonder what the examination rate is for employees that opt out of the voluntary GITCA program is. Now I am in no way a gambling man, but I am willing to bet a small farm in Texas it is significantly higher than .5%. By the way, I get a chill down my spine every time I type the word voluntary. 

I would sincerely hope that just because these employees did not participate in a voluntary program that they had no input in determining the rates would not have a high risk of being randomly examined by the IRS. I sincerely hope these fine people who live paycheck to paycheck to support their families will not get notices from the IRS charging them what equates to several months of pay in taxes and penalties and no detailed explanation as why they owe it. I would sincerely hope that they would not be forced to make a decision on whether to join a program that forces them to pay income tax on money they do not receive or take the chance of having that big white examination envelope from the IRS in the mail once a year. I would sincerely hope their employer and the IRS would show enough respect and consideration for these folks to consider all pertinent data when making decisions that could turn these employees lives upside down. I do sincerely hope so....... 

~John Catoni

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