The Internal Revenue Service (IRS) proposed revenue rules this week to prevent the service industry from reporting tips.
According to Monday’s announcement, the Service Industry Tip Compliance Agreement (SITCA) program will be a voluntary tip reporting system in which the IRS and service industry companies cooperate. As part of the proposal, The IRS will give the public. until early May to provide feedback on the program before it is implemented.
“The 87,000 new IRS agents you were promised will only target the rich,” tweeted Mike Palicz, federal affairs manager at Americans for Tax Reform. “They’re just coming after the waitress tip.”
According to the IRS, the program will seek to “improve compliance with tip reporting,” reduce administrative burdens and provide greater transparency and certainty to taxpayers.
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President Joe Biden (AP Photo/Evan Vokey/File)
Among the program’s features, the agency lists “monitoring employer compliance based on actual annual tip revenue and charging tip data from the employer’s point-of-sale system, and an allowance for adjustments to tipping practices from year to year.” “
It also states that participating employers will provide annual reports to the IRS, be protected from liability related to “rules that define tips as part of an employee’s pay,” and, pursuant to Sec. Will gain flexibility to implement internal tip reporting procedures. Tax law requires employees to report tips to their employers.”
“There’s no reason they would issue guidance on how to proceed if it was just going to end voluntarily,” Palak said in an interview. “Ultimately, the goal is to go and get as much revenue as possible from whatever you can.”
“In the background of all that — they told us they weren’t going to go after people making $400,000 or less,” he continued. “Well, there’s a new IRS rule that focuses on tips from waitresses. That’s what they’re focusing on, that’s what they’re putting the new rules on.”
The rule proposal comes years after the Treasury Inspector General for Tax Administration (TIGTA) published a report that found the IRS often provides tip income audit protection to non-compliant employers and employees. An estimated 30 percent of employers with tip reporting agreements did not report nearly $1.7 billion in tips, according to the report.
A waitress collects a tip from a customer. (iStock)
“One of the problems identified by TIGTA is that the IRS rarely revokes tip reporting agreements, resulting in non-compliant employers and in some cases , tip income audit protection for their employees continues.”
“TIGTA recommends that the IRS train its employees on specific criteria for terminating tip reporting agreements with taxpayers.”
Meanwhile, Democrats were hammered for a provision of the inflation-reduction act that boosted the IRS budget by $80 billion, opening the door for the agency to hire tens of thousands of new agents. The Republican-dominated House introduced legislation in early January to withdraw $70 billion from the fund.
“The last thing the American people need right now are more audits from an outside, bloated IRS,” Rep. Adrian Smith, R-Neb, one of the bill’s authors, said at the time. “Inflation Act funding for the IRS would hire 87,000 new IRS employees tasked with raising enough revenue to pay for Democrats’ Green New Deal priorities.”
And one Analysis released by House Republicans Last year’s tax provisions in the Inflation Reduction Act showed that Americans making less than $75,000 a year would have to bear 60% of the additional tax audits authorized as a result of the bill’s new funding for the IRS. will
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