IRS Proposes Revised Tip Reporting Program for Service Industry Employers
By The Internal Revenue Service (IRS) on Feb. 6 issued proposed guidance for a voluntary tip-reporting program between the agency and employers in various service industries.[0] The Service Industry Tip Compliance Agreement (SITCA) program is designed to take advantage of advances in point-of-sale, time and attendance systems, and electronic payment settlement methods to improve tip reporting compliance.
Notice 2023-13 contains a proposed revenue procedure that would establish the “Service Industry Tip Compliance Agreement” (SITCA) program. The Internal Revenue Service (IRS) states that requiring employers to submit an annual report at the end of each calendar year would reduce the necessity for them to undergo compliance reviews.[1] In addition, employers would be granted the flexibility to implement their own employee tip-reporting policies in accordance with the section of the tax law that requires employees to report tips to their employers.[2]
The program would also adjust for changes in tipping practices from year to year, and employers would receive protection from liability under rules that define tips as part of an employee’s pay during the years that they remain compliant with program requirements.[1]
Employers who have existing TRDA, TRAC, or EmTRAC agreements will remain in effect until either the employer is accepted into the SITCA program, the IRS finds that the employer is not compliant with the terms of the agreement, or the end of the first full calendar year after the final revenue procedure is published in the Internal Revenue Bulletin.[1]
The Internal Revenue Service stated that the implementation of this program would reduce the amount of stress placed on taxpayers and administration personnel, as well as providing more visibility and assurance.[3] [4] A significant portion of the income of those employed in the service industry is derived from tips, as their hourly rate is usually lower than the minimum wage.[5]
0. “IRS Proposes New Service Industry Tip Reporting Program” Law360, 6 Feb. 2023, https://www.law360.com/tax-authority/articles/1573177/irs-proposes-new-service-industry-tip-reporting-program
1. “IRS proposes tip-reporting program” Accounting Today, 6 Feb. 2023, https://www.accountingtoday.com/news/irs-proposes-tip-reporting-program
2. “IRS Proposes New Program for Reporting Tips Across Service Industry” The Epoch Times, 7 Feb. 2023, https://www.theepochtimes.com/irs-proposes-new-program-for-reporting-tips-across-service-industry_5039343.html
3. “IRS Introduces New Tip Reporting Program — How It Works” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/irs-introduces-tip-reporting-program-214644719.html
4. “IRS Looks to Start Tip Reporting Program for Service Industry” CPAPracticeAdvisor.com, 6 Feb. 2023, https://www.cpapracticeadvisor.com/2023/02/06/irs-unveils-tip-reporting-program-for-service-industry/76517/
5. “IRS proposes new reporting program for tips in the service industry” KTLA Los Angeles, 8 Feb. 2023, https://ktla.com/news/money-smart/irs-proposes-new-reporting-program-for-tips-in-the-service-industry/
