Taxpayer advocates fume at proposal from Biden’s IRS to crack down on TIPS by making servers report the cash they take home
- Proposal would be voluntary program between IRS and employers that the IRS says would ‘decrease taxpayer and IRS administrative burdens, according to IRS
- The proposal is now open to public comment until May 7
- ‘When you go around and you tell people that we’re going to audit people who wear monocles and hats, that’s not the service industry’
The Internal Revenue Service (IRS) proposed a new rule this week that would crack down on taxing the service industry’s tips.
The Service Industry Tip Compliance Agreement (SITCA) proposal would be a voluntary program between the IRS and employers that the IRS says would ‘decrease taxpayer and IRS administrative burdens and provide more transparency and certainty to taxpayers.’
The proposal is now open to public comment until May 7.
The program would monitor employer compliance based on actual annual tip revenue and charge tip data from an employer’s point-of-sale charge machine. Participating employers would submit their own annual report after the close of the calendar year, reducing the need for audits by the IRS.
The law already requires servers to report tips as income, but the new proposal would update compliance measures.
It comes as the IRS is emboldened by $80 billion to hire 86,000 new agents thanks to President Biden’s Inflation Reduction Act.
The Internal Revenue Service (IRS) proposed a new rule this week that would crack down on taxing the service industry’s tips
The White House said the money would be used to crack down on wealthy tax cheats, insisting the audit rate would not increase for lower and middle income people.
‘When you go around and you tell people that we’re going to audit people who wear monocles and hats, that’s not the service industry,’ Mike Palicz, federal affairs manager at Americans for Tax Reform, told DailyMail.com.
And while President Biden has repeatedly insisted he would not raise taxes on anyone making under $400,000, taxpayer advocates say the tip crackdown proposal proves the agency is going to focus its bolstered enforcement on low and middle-income earners.
The Service Industry Tip Compliance Agreement (SITCA) proposal would be a voluntary program between the IRS and employers that the IRS says would ‘decrease taxpayer and IRS administrative burdens’
‘Biden told the American people that his 87,000 new IRS agents were only going to target the millionaires and billionaires,’ Rep. Claudia Tenney, R-N.Y., a member of the Small Business Committee, told DailyMail.com.
‘Yet now it’s clear that the hands of big government may be scheming to reach further into the tip jars of hardworking Americans, even by possibly attacking the waiters and waitresses already working paycheck to paycheck.’
Patrick Hedger, executive director of the Taxpayers’ Protection Alliance, told DailyMail.com the proposal made it clear the IRS wasn’t going after ‘wealthy individuals with expensive lawyers and accountants.’
‘The IRS will instead ramp up its efforts to pick even more low-hanging fruit among struggling Americans.’
‘This pilot program is yet another attempt by the IRS and the Biden Administration to squeeze every last penny out of hard-working Americans at a time when 64% of Americans are already living paycheck to paycheck,’ Rep. Nicole Malliotakis, R-N.Y., a member of the Ways and Means Committee, told DailyMail.com, citing statistics from a recent LendingClub report.
‘It’s not a bartender who’s going to be able to have a drag out fight with the IRS,’ added Palicz.
