by Mindy Aguon

The Internal Revenue Service executed search warrants at the restaurant's locations in Tumon and Hagatna last week Wednesday, seizing numerous records including pay stubs, payroll records, sales records and other items. The investigation, according to documents filed with the district court, surrounds the restaurants' service charges that are added to each guest check. While it should be included as part of gross receipts and added to an employee's wage amount, the IRS noted that it did not appear that TGI Friday's Guam inc. owner, Watami, and Guam business manager Lerma Aquino reported a majority of the service charges paid to its employees as wages or tips. Informants even told the IRS that they were allegedly informed to under-report the amount of tips they received. Employers on Guam are required to withhold federal income taxes from an employee's wages and pay over those withholdings to the Department of Revenue and Taxation. Employers are also required to withhold Social Security and Medicare taxes and pay these withholdings to the IRS.