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IRS Targets Tips Again

Joe Biden IRS

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Within hours of Joe Biden’s claim in the State of the Union that “under my plan, nobody earning less than $400,000 a year will pay an additional penny in taxes,” one government agency seems to have other plans. The Internal Revenue Service (IRS) issued a new procedure that would involve service providers reporting their workers’ tips to the tax agency.

The initiative is 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 an agency statement, it would “decrease taxpayer and IRS administrative burdens and provide more transparency and certainty to taxpayers.”  

The companies involved will be required to submit an annual report to the IRS on tips received by their workers. By doing so, they “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.”

The IRS already has extensive oversight over tips. People 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 them.  

The missive was issued in October 2022 following the passage of the Inflation Reduction Act, which allowed the agency to nearly double its workforce. The legislation disbursed $80 billion to make this happen.  

Some Republicans seek to retire the IRS

The Fair Tax Act was introduced in the House in early January by Congressman Earl “Buddy” Carter (R-GA). The bill would fundamentally change the tax system and would take direct aim at the Internal Revenue Service.  

IRS targets tips again, EFE
The IRS was one of the agencies that benefited most from the Inflation Reduction Act (EFE).

It would also eliminate all income taxes, payroll taxes, estate taxes and gift taxes. In return, it would create a 23% sales tax, which would be collected directly by the states and remitted to the Treasury. The latter would directly retire the IRS and render the agency virtually obsolete.

Sales tax is a percentage added to the value of the product or service when it is purchased by the consumer. For example, if a chair has a value of $5, this tax would bring its final price to $6.15 for the consumer.

¡More! Los 5 puntos principales del Estado de la Unión de Biden

The legislation currently divides House Republicans. The leadership, comprised of Speaker McCarthy and Steve Calise, was less than enthusiastic about the bill. The former opted to wait for it to pass through committee, while the latter proposed directly codifying the 2017 tax cuts enacted by former President Trump.  

In addition to Carter, the text had 22 co-sponsors. They are Andrew Clyde, Jeff Duncan Kat Cammack, Scott Perry, Bob Good, Thomas Massie, Ralph Norman, Bill Posey, Gary Palmer, Jim Banks, Barry Loudermilk, John Carter, Gus Bilirakis, Matt Gaetz, Marjorie Taylor Green, John Rutherford, Warren Davidson, Gregory Steube, Byron Donalds, Mike Collins, Barry Moore, Eric Burlison and Tim Walberg.

Joaquín Núñez es licenciado en comunicación periodística por la Universidad Católica Argentina. Se especializa en el escenario internacional y en la política nacional norteamericana. Confeso hincha de Racing Club de Avellaneda. Contacto: [email protected] // Joaquín Núñez has a degree in journalistic communication from the Universidad Católica Argentina. He specializes in the international scene and national American politics. Confessed fan of Racing Club of Avellaneda. Contact: [email protected]