IRS Moves To Go After Workers’ Tips As Biden Promises Middle Class Won’t Be Taxed More
Jacquelyn Martin/AP/Bloomberg via Getty Images

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.” Individuals who work in restaurants, hotels, salons, and other service-oriented businesses are already required to keep a daily record of their tips and pay taxes on the earnings to the IRS.

The proposed rule comes after the IRS received an $80 billion windfall through the Inflation Reduction Act, permitting the agency to double its workforce. During his State of the Union address on Tuesday, President Joe Biden repeated his promise that the middle class would not pay more taxes as he introduced a proposal for a billionaires tax.

“Under my plan, nobody earning less than $400,000 a year will pay an additional penny in taxes,” the commander-in-chief declared. “Nobody. Not one penny.”

The tip reporting initiative also follows an IRS proposal that would require Americans to report transactions above $600 made through payment settlement companies such as PayPal and Venmo. Following public backlash, the agency later announced a “transition period” for the implementation of the rule, which will still enter into effect beginning in the 2023 tax year.

Treasury Secretary Janet Yellen has likewise vowed that the funds from the Inflation Reduction Act would not be used to increase audit rates for American households earning less than $400,000 per year “relative to historical levels.” She failed to clarify that “historical levels” of enforcement were far higher as recently as one decade ago: audit rates for Americans earning between $25,000 and $200,000 declined 76% between 2010 and 2019, according to data from the Government Accountability Office.

Officials have also repeatedly stated that the funding would enable IRS staff to more easily assist individuals and businesses seeking to file their taxes. The Treasury Inspector General for Tax Administration nevertheless said in a report that the agency’s budget for enforcement activities will increase 69% over the next decade, while the budget for taxpayer services will increase 9%.

The report also showed that IRS officials “have not yet finalized what constituted the $400,000 income level or what historic audit level will be used for its metrics,” indicating that such matters are “still being discussed between the IRS and the Treasury Department.” The agency insisted there is not “an immediate risk” of violating the commitment because “employee attrition and hiring challenges will limit its ability to conduct more audits.”

Create a free account to join the conversation!

Already have an account?

Log in

Got a tip worth investigating?

Your information could be the missing piece to an important story. Submit your tip today and make a difference.

Submit Tip
Download Daily Wire Plus

Don't miss anything

Download our App

Stay up-to-date on the latest
news, podcasts, and more.

Download on the app storeGet it on Google Play
The Daily Wire   >  Read   >  IRS Moves To Go After Workers’ Tips As Biden Promises Middle Class Won’t Be Taxed More