Ted Cruz Criticizes IRS' Proposed Tip Reporting Program as 'Unconscionable' Act of Cruelty

The IRS, traditionally one of the least popular federal agencies, has come under fire once again with the announcement of a proposed new program. The Service Industry Tip Compliance Agreement (SITCA) is a voluntary tip reporting program between the IRS and employers in various service industries aimed at improving gratuity reporting compliance and reducing unreported tip income. The proposed program has already drawn the ire of Republican lawmakers, who view it as an example of the IRS “punishing everyday Americans.” Under SITCA, employers in all service industries, with the exception of the gaming sector, with at least one business location, can participate in the program. The program is designed to take advantage of changes in how tips are given and how employers monitor and report those tips to the IRS. Employers that participate in SITCA would give the IRS an annual report of their electronic tip information and an estimation of cash tips. Employees collecting tips wouldn’t have to do anything to report their income, which the IRS hopes will “decrease taxpayer administrative burden.” The IRS already has two tip reporting programs that SITCA aims to replace. The Tip Rate Determination Agreement (TRDA) allows the IRS and employers to agree on selected tip rates for different categories of employees, while the Tip Reporting Alternative Commitment (TRAC) has employers prepare a monthly report on tip income based on disclosures from employees who receive cash tips. The IRS appears to be trying to sell employers on SITCA by simplifying “the burden of employer reporting.” Critics of SITCA argue that it will lead to a tax increase for service workers. While the program is intended to reduce unreported tip income, the consequence of more accurate reporting of tip income is often a higher income tax. Republican lawmakers and critics of the program have accused the Biden administration of breaking its promise not to raise taxes or increase audit rates for those making less than $400,000