The IRS seeks public input regarding the proposed Service Industry Tip Compliance Agreement (SITCA) program.
The Service Industry Tip Compliance Agreement (SITCA) program is a voluntary tip reporting program between the IRS and employers in various service industries. It was announced by the Treasury Department and the IRS in Notice 2023-13, which was published on 6th February. The IRS is releasing this guidance in the proposed form to give the public a chance to comment.
The goal of the proposed SITCA program is to increase tip reporting compliance by utilizing improvements in point-of-sale, time and attendance, and electronic payment settlement technologies. The proposed program would also lessen the administrative burden on taxpayers and the IRS while giving taxpayers more clarity and assurance. The proposed program has the following characteristics:
- Based on actual annual tip revenue and charge tip data from an employer’s point-of-sale system, the monitoring of employer compliance makes allowances for changes in tipping practices from year to year.
- By submitting an annual report following the end of the calendar year, participating employers demonstrate compliance with the program’s requirements, which lessens the need for compliance audits by the IRS.
- For calendar years in which they continue to comply with program requirements, participating employers are shielded from liability under the regulations that classify tips as part of an employee’s pay.
- In accordance with the provisions of the tax law requiring employees to report tips to their employers, participating employers are free to implement employee tip reporting procedures that are most suitable for their workforce and their business model.
The SITCA program would take the place of the following initiatives and serve as the only tip-reporting compliance program for employers in different service industries:
- Tip Rate Determination Agreement (TRDA)
- Tip Reporting Alternative Commitment (TRAC)
- Employer-designed TRAC (EmTRAC)
The current Gaming Industry Tip Compliance Agreement (GITCA) program is unaffected by this program because the IRS is still looking into opportunities in the gaming sector.
According to the proposed revenue procedure, any agreements currently in place between an employer and one of these parties would be valid until the earlier date of:
- acceptance of the employer into the SITCA program;
- a finding by the IRS that the employer has violated the terms of their TRDA, TRAC, or EmTRAC agreement;
- the conclusion of the first full calendar year following the Internal Revenue Bulletin publication of the final revenue procedure.
By following the instructions in the notice and responding by May 7, 2023, anyone interested in offering feedback on the proposed SITCA program may do so.
The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Your specific facts may hold various opportunities and possible risks that only trained, experienced, and highly qualified tax specialists can spot. We encourage you to find such help, rather than trying to figure it out alone. Consider giving this marketplace a try by posting your project and signing up here.
If you are a licensed tax professional interested in helping others either part-time, full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.