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Daniel C. Conlon

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Co-chair, Hospitality Group

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New IRS Program Could Change the Way Food & Beverage Industry Tips are Reported – But First…the IRS Wants to Hear From You

Daniel C. Conlon, Esq., dconlon@tuckerlaw.com, (412) 594-3951

Get ready for a game-changer in tip reporting compliance! The Treasury Department and IRS have just announced the proposed launch of the Service Industry Tip Compliance Agreement (SITCA) program.

SITCA is a voluntary program that aims to encourage employers in the food and beverage industry, among others, to report employee tips more accurately. The program will utilize advancements in point-of-sale (POS), and electronic payment settlement methods to monitor employer compliance based on actual annual tip revenue and charge tip data from an employer’s POS system. Participating employers will have the flexibility to implement employee tip reporting policies that are best suited for their employees and their business model.

One of the key features of SITCA is that participating employers will be required to submit an annual report after the close of the calendar year to demonstrate compliance with the program requirements, reducing the need for compliance reviews by the IRS. In return, participating employers will 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 proposed program is expected to provide more transparency and certainty for taxpayers while decreasing administrative burdens for both employers and the IRS. The intent of the SITCA program is to serve as the sole tip reporting compliance program for employers in various service industries and would replace the Tip Rate Determination Agreement (TRDA), Tip Reporting Alternative Commitment (TRAC), and Employer-designed TRAC (EmTRAC) programs.

The IRS has not finalized procedures for the proposed SITCA program. If you want to provide feedback on the proposed SITCA program, you can submit your comments to the IRS before May 7, 2023. To do so, visit www.regulations.gov (indicate IRS and Notice 2023-13) or follow the instructions in Notice 2023-13 to submit feedback by mail.

The future of tip reporting is here, are you ready?”

For further information contact Daniel Conlon at (412) 594-3919.

February 15, 2023

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