Biden’s IRS plans to crack down on server tips
The Internal Revenue Service (IRS) this week proposed a tax proceeding to crack down on the reporting of tips by the service industry.
The so-called Service Industry Tip Compliance Agreement (SITCA) program would be a voluntary tip reporting system in which the IRS and service industry businesses cooperate, according to Monday’s announcement. As part of the proposal, the IRS will give the public until early May to provide feedback on the program before implementing it.
“These 87,000 new IRS agents you were promised would only target the wealthy…” tweeted Mike Palicz, federal affairs manager at Americans for Tax Reform. “They come after waitress tips now.”
According to the IRS, the program would aim to “improve tip reporting compliance,” reduce administrative burdens, and provide more transparency and certainty for taxpayers.
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Among the program’s features, the agency lists “employer compliance monitoring based on actual annual tip revenues and tip billing data from an employer’s point-of-sale system, and the ability to adjustments in tipping practices from year to year”.
It also states that participating employers would provide the IRS with annual reports, enjoy protection from liability related to “rules that define tips as part of an employee’s compensation,” and have the ability to implement internal procedures for reporting tips “in accordance with the section of the tax law that requires employees to report tips to their employer.
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The proposed rule comes years after the Treasury Inspector General for Tax Administration (TIGTA) issued a report finding that the IRS often offered tip income audit protection to non-compliant employers and employees. . According to the report, about 30% of employers with tip reporting agreements failed to report tips worth nearly $1.7 billion.
“One of the issues identified by TIGTA is that the IRS rarely revokes tip reporting agreements, resulting in continued tip revenue audit protection for non-compliant employers and, in some cases, their employees. “, said the IRS in a notice published Monday.
“TIGTA recommended that the IRS train its employees on specific criteria for revoking tip reporting agreements with non-compliant taxpayers.”
Meanwhile, Democrats have been hammered for a provision in the Cut Inflation Act that boosted the IRS budget by $80 billion, opening the door for the agency to hire tens of thousands. new officers. The Republican-dominated House passed legislation reversing $70 billion of that funding in early January.
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“The last thing the American people need right now is more audits from an out-of-control, bloated IRS,” said Rep. Adrian Smith, R-Neb., the bill’s author, at the time. , to Fox News Digital. “Funding the Inflation Act for the IRS would lead to the hiring of 87,000 new IRS staff tasked with generating enough revenue to pay for Democrats’ Green New Deal priorities.”
And an analysis released last year by House Republicans of the Cut Inflation Act’s tax provisions showed that Americans earning less than $75,000 a year would bear the brunt of 60% of additional tax audits. authorized as a result of new bill funding for the IRS. .