IRS proposes new program to crack down on tips and other services for waiters

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The government targets those who are unable to defend themselves.

IRS data shows the agency mainly targets low-income people β€” but a few millionaires and billionaires.

In January, Speaker McCarthy dropped the gavel and said the Republican-controlled House was “promised” to approve the first bill to cut funding for 87,000 IRS agents.

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On Monday, the Internal Revenue Service (IRS) announced new regulations for a voluntary tip-reporting scheme between the government and employers in various service industries such as entertainment, hospitality, housekeeping and others.

“This guidance contains a notice of proposed revenue procedures establishing the Service Industry Tip Compliance Agreement (SITCA) program,” according to the IRS notice.

“SITCA is a voluntary tip reporting program among the Internal Revenue Service and employers in service industries (except the gaming industry) designed to increase tax compliance through the use of contracts rather than traditional audit techniques.”

The new, voluntary program will replace the Tip Rate Determination Agreement (TRDA), the Tip Reporting Alternative Commitment (TRAC), and the Employer Designed TRAC (EmTRAC).

Americans have until May 7, 2023 to keep track of the proposed program, according to the IRS notice, and submissions can be made in one of two ways:

  1. mail. File papers with CC:PA:LPD:PR (Notice 2023-13), Room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044.
  2. electrically. Submit electronically through the federal eRulemaking portal at following the online instructions for submitting comments (refer to IRS and Notice 2023-13). Once submitted to the Federal Rulemaking Portal, comments cannot be edited or withdrawn. Commenters are strongly encouraged to submit public comments electronically. The Treasury Department and the IRS will make available to the public any comments submitted electronically, and to the extent practicable on paper, in its public docket.

Fox News reported:

According to the IRS, the program will seek to “improve tip reporting compliance,” reduce administrative burden, and provide greater transparency and certainty to taxpayers.

Among the program’s features, the agency lists “monitoring of employer compliance based on annual tip revenue and charge tip data from an employer’s point-of-sale system and allowance for adjustments in 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 wages,” and have the flexibility to implant internal tip reporting procedures by department. Tax laws that require workers to report tips to their employers.”

“If it’s just going to end up being voluntary, there’s no reason they’re going to issue guidelines on how to crack it down,” Poliz told Fox News Digital in an interview. “Ultimately, the goal is to capture as much revenue as possible and from whomever they can.”

“The background to all of this β€” they’ve told us they’re not coming after they’re making $400,000 or less,” he continued. β€œWell, here’s a new IRS rule that focuses on bringing in tips from waitresses. That’s what they’re focused on doing, that’s what they’re setting new rules for.”

More from the IRS:

This notice sets forth a proposed revenue procedure that establishes the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program offered by the Internal Revenue Service (IRS) to employers in the service industry (except employers in the gaming industry).1. The SITCA program is intended to replace the Tip Reporting Alternative Commitment (TRAC) program and the Tip Rate Determination Agreement (TRDA) program, as well as the Employer-Designated Tip Reporting Program (EmTRAC). The proposed revenue procedure provides that upon termination of the TRAC, TRDA, and EmTRAC programs, employers with existing tip reporting agreements in those programs will have a transition period during which their existing agreements remain in effect. The transition period will end upon (1) the employer’s acceptance into the SITCA program, (2) an IRS determination that the employer is in noncompliance with the terms of the TRAC, TRDA, or EmTRAC Agreement, or (3) the first calendar year beginning after the date the final revenue procedure is published in the last Internal Revenue Bulletin. of the year The IRS is issuing this guidance in proposed form to provide an opportunity for public feedback.

The proposed revenue procedure sets forth the requirements for an employer to participate in the SITCA program. A qualified employer, called a “service industry employer,” is generally an employer (other than an employer in the gaming industry) that (1) is in a service industry where employees perform services for customers and those services generate sales that are subject to tipping by customers, ( 2) has at least one covered establishment, and (3) has been in compliance with federal, state, and local tax laws for the three full calendar years immediately preceding the application submission date (prior period) and subsequent calendar quarters through any calendar quarter ending prior to the period in which the service The industrial employer’s application is pending for some or all of the quarter.

The proposed revenue procedure also specifies the requirements for each covered establishment to participate in the SITCA program. A covered establishment must have tipped employees who use a technology-based time and attendance system to report tips under section 6053(a). Each covered establishment must use a POS system to record all sales subject to tipping, and that POS system must accept the same form of electronic payment for tips as it does for sales. The IRS will accept employers and covered establishments into the SITCA program that meet the eligibility criteria if the IRS also determines, in its sole discretion, that acceptance is warranted by the facts and circumstances and is in the interest of sound tax administration.