The IRS has issued a proposed revenue procedure that would create a Service Industry Tip Compliance Agreement (SITCA) program.
The SITCA program includes monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer’s point-of-sale system and allowance for adjustments in tipping practices year to year.
Participating employers submit an annual report after the close of the calendar year, billed as reducing the need for compliance reviews by the IRS.
The SITCA program would protect complying employers from liability under the rules that define tips as part of an employee’s pay. The proposed program would also decrease taxpayer and IRS administrative burdens and provide more transparency and certainty to taxpayers.
Anyone interested in providing feedback on the proposed SITCA program should follow the instructions in Notice 2023-13 and reply by May 7, 2023.