The Internal Revenue Service released a proposed revenue procedure on Monday which would entail employers in the service industry voluntarily reporting their workers’ tips to the tax agency.
The Service Industry Tip Compliance Agreement initiative, for which the IRS is soliciting feedback through early May, would be “designed to take advantage of advancements in point-of-sale, time and attendance systems, and electronic payment settlement methods to improve tip reporting compliance,” according to a notice from the agency. The program would exist to decrease “administrative burdens” on taxpayers and IRS administrators.
Businesses involved with the initiative would submit an annual report on tips to the IRS after each calendar year; participants would thereby “receive protection from liability under the rules that define tips as part of an employee’s pay for calendar years in which they remain compliant with program requirements.”
