This week, the Internal Revenue Service (IRS) proposed a revenue procedure aimed at stricter enforcement of tip reporting in the service industry.
The Internal Revenue Service announced on Monday the proposed Service Industry Tip Compliance Agreement (SITCA) program, which would be a voluntary system of tip reporting in collaboration between the IRS and service industry companies. The IRS will provide an opportunity for public feedback on the program before its implementation, giving the public until early May to provide input.
"Those 87,000 new IRS agents that you were promised would only target the rich," tweeted Mike Palicz, federal affairs manager at Americans for Tax Reform. "They're coming after waitresses' tips now."
Those 87,000 new IRS agents that you were promised would only target the rich...
They're coming after waitresses' tips now: "monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer's point-of-sale system."https://t.co/WAvh0t2cNN
— Mike Palicz (@Mike_Palicz) February 7, 2023
The IRS stated that the Service Industry Tip Compliance Agreement (SITCA) program aims to enhance compliance in tip reporting, decrease administrative challenges, and increase transparency and certainty for taxpayers.
The IRS highlighted the following features of the Service Industry Tip Compliance Agreement (SITCA) program: monitoring of employer compliance through the analysis of actual annual tip revenue and charge tip data from the employer's point-of-sale system, and provision for adjustments in tipping practices from year to year.
According to a report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS often failed to enforce compliance in tip reporting, with an estimated 30% of employers with tip reporting agreements not reporting tips worth almost $1.7 billion. The new proposed revenue procedure is aimed at improving compliance and reducing administrative burden.
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