Fior D'Italia, Inc. v. United States

OPINION AND ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

The plaintiff taxpayer challenges the Internal Revenue Service’s use of a so-called “aggregate” method to determine, assess and collect an employer’s share of FICA taxes on the tips received by its restaurant employees. Plaintiff has moved for summary judgment on this issue, and the government has filed a cross-motion for summary judgment on its counterclaim for the payment of the IRS’s assessment. The motions were argued and submitted for decision. The court has reviewed the moving and opposing papers, the record and the applicable authorities.

I.

Plaintiff Fior D’ltalia operates a restaurant in which its employees receive tips. It computes and pays its share of Federal Insurance Contribution Act (“FICA”) taxes for each employee, based on each employee’s salary and tip reports. Each year it files a Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips.

In 1994 the Internal Revenue Service (“IRS”) sent plaintiff a Notice and Demand to pay its share of FICA taxes allegedly due on tips not reported by its employees for the years 1991 and 1992. The IRS computed the alleged amount of plaintiffs…