The IRS and the Treasury Department unveiled a plan on February 6 to create a new tip reporting system that would take the place of three other systems now in effect. A voluntary agreement between firms that employ tip earners and the IRS would be the Service Industry Tip Compliance Agreement (SITCA) scheme for reporting tips obtained through point of sale or other electronic transactions.
Some in the audience were furious after the news. Conservative pundit Kevin Glass criticized the proposal, claiming it was evidence that the IRS was targeting “tipped employees” rather than the wealthy.
Regarding individuals who include gratuities in their income, the tax code hasn’t altered, nevertheless. Employees must keep track of their tip money and report it to the tax authority for correct taxes, according to the IRS.
President Joe Biden was also called out by Representative Tom Massie (R-KY), who accused him of discriminating against servers in the US.
On February 7, Biden reaffirmed a pledge he made at the State of the Union speech, saying that under his leadership, no one who earns less than $400,000 a year will pay even a single penny more in taxes. Some believe that commitment is broken by the new tip-tracking scheme.
The IRS, flush with a boosted enforcement budget that they totally promise is to go after rich people has… announced a crackdown on service industry tipped workers https://t.co/73FLE0tir3— Kevin 👐 Glass (@KevinWGlass) February 7, 2023
The reporting scheme really forms a partnership between the IRS and businesses with the aim of making it simpler to comply with current tax rules, rather than involving the tipped employees. SITCA is meant to make reporting easier for employers and minimize the need for tax agency compliance audits.
However, the timing and optics undoubtedly enraged many Americans, who turned to social media to express their opinions. They appeared to think, as Biden said in his SOTU, that the government is concentrating on American families who are just struggling to make ends meet rather than the wealthy.