March 16, 2025 #1 Local News, Forum, Information and Event Source for Venice Beach, California.

IRS Considering Changing How Service Industry Employees Report Tips

New IRS proposal would create one voluntary compliance agreement

The IRS has proposed a new voluntary tip reporting program that would be aimed at service industry workers such as servers to increase compliance with tip reporting requirements.

Currently, employees who earn at least $20 a month in tips must keep detailed records of those tips and any associated income is required to be reported on their tax returns. Employers are also responsible for withholding taxes on income earned from tips.

At present, certain industries that rely heavily on tipping have established three different voluntary compliance agreements with the IRS: TRAC (Tip Reporting Alternative Commitment), TRDA (Tip Rate Determination Agreement), and GITCA (Gaming Industry Tip Compliance Agreement). Now, the IRS has proposed an additional one-stop shop for all service industry workers with one single agreement – the Service Industry Tip Compliance Agreement.

This proposed program includes several features that should make it easier for employers to comply with tax law requirements surrounding tip reporting: monitoring compliance based on annual tip revenue and charge data from point-of-sale systems; participants submitting an annual report after the close of each calendar year to reduce compliance reviews by the IRS; protection from liability if compliant during applicable calendar years; and flexibility to implement employee-friendly policies around tip reporting rules. 

The current system requires employees to be aware of how much they are reporting in tips on their income taxes. Many people are unaware that this is even required and may not be able to accurately report their tip income appropriately. The proposed changes aim to make the process simpler by introducing payroll-based reporting, which would allow employers to use their existing payroll systems to easily track their employees’ tip earnings.

The changes could also benefit customers by providing them with greater transparency into how their tips are being handled and utilized by businesses. With current regulations, employers are allowed to keep up to 8% of an employee’s tips as a sharing fee, meaning that less money than expected is actually provided directly to an employee. Under new rules proposed by the IRS, this practice may become more closely monitored or regulated as part of any change in policy.

For service industry employees, these potential changes come with both pros and cons. On one hand, it would create a clearer system for wages that may be more accurate and easier to follow for everyone involved. On the other hand, it could leave employers with more control over tip income made by employees, potentially reducing what workers take home at the end of shifts as businesses adjust to any new policies or fees required under revised regulations.

The move comes as the IRS has increased hiring efforts even though the agency noted they will not be conducting additional audits on Americans making less than $400,000 annually. In total, the IRS has hired 87,000 new employees since the start of the pandemic.

Related Posts

Santa Monica College President Honored as 2025 Woman of the Year for Assembly District 51

March 13, 2025

March 13, 2025

Her tenure has focused on expanding access to education for underrepresented communities Santa Monica College Superintendent and President Dr. Kathryn...

Palisades High School Band to Perform at Hollywood Bowl to Honor First Responders

March 13, 2025

March 13, 2025

Titled WE ❤️ LA, the event will feature a program spanning classical, jazz, and iconic film scores The Palisades Charter...

Venice Shorts: Longtime Marina Del Rey Real Estate Firm Undergoes Rebranding

March 13, 2025

March 13, 2025

The longtime real estate brokerage is a popular boutique firm for both buyers and renters  By Nick Antonicello  RE/MAX Estate...

Venice Art Crawl Opens Registration for March 20 Event

March 13, 2025

March 13, 2025

Organizers encourage artists of all disciplines to sign up before the deadline Registration is now open for the upcoming Venice...

Three Charged in FEMA Fraud Scheme Following California Wildfires

March 13, 2025

March 13, 2025

Fraud related to disaster benefits carries a maximum sentence of 30 years in federal prison Three individuals, including two from...

(Video) See Inside the New Google Store in Santa Monica

March 13, 2025

March 13, 2025

The Shop Marks the Second Physical Retail Space on the West Coast For the Tech Giant The Shop Marks the...

(Video) Wildfire Attorney. Law Offices of Allen Farshi

March 13, 2025

March 13, 2025

How The Law Offices of Allen Farshi Can Safeguard You Amid Wildfire Loss. For more information, check out the video...

Four New Eateries Open Along Venice Boardwalk, Replacing Mr. Charlie’s

March 12, 2025

March 12, 2025

The eateries move into the space previously occupied by a comedic vegan fast-food chain known for its satirical takes on...

St. Patrick’s Day Rooftop Parties, Live Music and Festivities Coming to Venice Beach This Weekend

March 12, 2025

March 12, 2025

With multiple venues offering unique takes on the holiday, revelers in the Venice Beach area will have no shortage of...

Santa Monica College Among Schools Warned by Department of Education Over Antisemitism Claims

March 12, 2025

March 12, 2025

The letter, issued Monday, cautioned that the schools must uphold their obligations under Title VI of the Civil Rights Act...

Cat Rescued From Palisades Fire Gets Outpouring of Support for Medical Recovery

March 12, 2025

March 12, 2025

The cat was found two months after the fire, emaciated and suffering from burns A cat that survived for weeks...

Residents Urged to Secure Homes and Avoid Flood Zones Ahead of Major Storm

March 11, 2025

March 11, 2025

County officials are advising residents to take immediate steps to protect their homes and families Los Angeles County officials are...

Pacific Resident Theatre to Stage Psychological Drama ‘Willing Suspension of Disbelief’

March 11, 2025

March 11, 2025

The play challenges distinctions between actor and role, victim and perpetrator, weaving a suspenseful exploration of perception and memory A...

Venice Shorts: Is Empower LA Impeding the Legitimacy of the VNC Election Process?

March 11, 2025

March 11, 2025

Stakeholders Frustrated Just to Secure a Ballot, Participation in Venice Continues to Plummet By Nick Antonicello  The first wave of...

Santa Monica City Council to Discuss Homelessness Strategic Plan and New Police SMART Center

March 11, 2025

March 11, 2025

Public input will be accepted on various agenda items, with discussions scheduled to begin at 5:30 p.m. The Santa Monica...