The Internal Revenue Service wants to do a better job of monitoring, and presumably taxing, tips in the service industry.
The U.S. Treasury Department and IRS on Monday introduced the Service Industry Tip Compliance Agreement (SITCA), which the agency says would be a “voluntary” program involving restaurants, bars, food delivery and other businesses where workers earn money from tips.
“The proposed SITCA program 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 the IRS.
Aspects of SITCA include monitoring how much revenue is generated through tips and annual reporting by employers.
Businesses would also receive “protection from liability under the rules that define tips as part of an employee’s pay,” the IRS said.
Many service industry workers rely on tips as a large source of income since they typically earn less than minimum wage as an hourly rate.
The public comment period is open until May 7, 2023.