The IRS and Tips

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…

Aspects of SITCA include monitoring how much revenue is generated through tips and annual reporting by employers.

Is this part of the 87,000 employee expansion?


This is the kiss of death for many small mom and pop restaurants. The IRS will “become more friendly” as in “getting to know you”.

This is not taxing the wealthy. Or enforcing the taxing of the wealthy. Automatically some high percentage of the IRS budget just got commandeered to go against the lower wage earners.


Hey there Mr. Carlson, you know its not but you’re just asking questions, right? :stuck_out_tongue:

This is nothing more than an update to the EXISTING program that dates back to 1995 and that has been modified numerous times over the years:

The Tip Reporting Determination/Education Program (TRD/EP) was designed by the IRS to enhance tax compliance through educational programs and the use of voluntary tip reporting agreements instead of traditional audit techniques. Since 1995, TRD/EP has offered employers in the food and beverage industry the opportunity to enter into TRAC agreements.


Not sure about that. Most restaurants accept credit card payment for the food and drinks and the TIP. The employer pays the tips out from his credit card receipts. These are mostly already tracked and reported. Some cash tips get thorough the cracks, but according to my daughter who works in the industry, 90% of the checks are paid with a credit card that includes the tip.



Depends where she works. I was thinking of the smaller moms and pops where people make a point of tipping in cash.

The clubhouse where I live I tip in cash because I do not drink. I leave a few bucks and have one or two soda waters with lime. Join neighbors a few nights a week. The automatic tip on the bill for diners is 18%. In the clubhouse accounting the IRS will see right away everything is kosher. That is not true in so many small restaurants.


@Leap1 - I’m on the ground in small communities in MA. I work with small businesses daily as part of my role on the Board of the local Chamber and as a volunteer with

There are few businesses that still rely on cash transactions / cash tips here. Even the small ones have POS registers and take credit cards - they would be out of business if they didn’t take credit cards.

I still have to disagree with you on whether this will put mom and pop restaurants out of business.



Everyone now is using credit cards. This day was coming. The mom and pops are not all prepared for it in their accounting. They are not going to fully inform you. Not on this.

This does not happen with many businesses I can assure you. I see lots of books and I see lots of tax returns as a SCORE counselor. (You might want to familiarize yourself with SCORE and what we mentors / counselors do).

Here is a great article about why some of these folks might be complaining. I saw it time and time again with restaurants looking for PPP grants. They didn’t get their PPP application accepted because they were running some of their business “under the table” and servers were pocketing their tips instead of reporting them. They had a bad / incomplete set of financial books. That’s not helpful in the long run for anyone.

Did you know that for every dollar that is not reported to the IRS / Social Security, those dollars are not counted towards their retirement benefits? I hope these folks are saving their cash in a mattress somewhere because they won’t be collecting as much Social Security in their retirement because they scre@@d the government by not paying their full tax obligation.



You are preaching to the choir