How is the irs able to determine the amount of tips

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Reference no: EM13913738

Anita Leland, a waitress in Atlantis Casino, reported tips of $467 to her employer last year. Two months after she filed her federal income tax return, Leland received a letter from the IRS informing her that she had earned $5,260 in tips rather than the $467 reported and that she owed the government $1,872.94 in back taxes.

a. How is the IRS able to determine the amount of tips received by a waitress in a casino?

b. If the IRS is correct in its determination of the tips received, is Atlantis subject to a penalty for not having withheld payroll taxes on all the tips Leland received during the year?

Reference no: EM13913738

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