FICA Tax Tip Credit

After being passed by the House of Representatives, this year’s reconciliation bill (H.R. 1) moved to the Senate, which passed its own version of the legislation today, July 1.  The Senate bill would preserve without significant change many tax-related items from the House bill.  There are several provisions, however, where the Senate bill varies from the version the passed the House earlier.  The Senate-passed legislation will now head back to the House, where its fate is somewhat uncertain.

We previously covered several of the relevant tax provisions when House passed its version of the reconciliation bill.  This article is part of a series of articles examining how those provisions would change under the Senate’s legislation.

The Senate-passed bill contains a new edition of the No Tax On Tips provision, adopting aspects of the provision included in both the House reconciliation bill passed by the House of Representatives (the “House Bill”) (see prior coverage) and in the previous standalone Senate bill on No Tax On Tips (“S. 129”) (see prior coverage).Continue Reading Senate Reconciliation Bill Retains No Tax on Tips Provision with Some Changes

The House of Representatives continues work on a reconciliation bill that would enact significant tax provisions and spending cuts.  The various legislative committees have completed work on the areas of the bill within their jurisdiction, including the Ways and Means Committee, which proposed language that would enact $3.8 trillion in tax cuts over the next ten years.  Over the weekend, the House Budget Committee consolidated the legislation, and the House Bill is now before the Rules Committee, where a managers’ amendment may be considered before it heads to the House floor.  This article is one of a series of articles discussing various proposals in the legislation that touch on tax withholding, reporting, and fringe benefits.

The House Bill includes legislative language that would implement President Trump’s campaign proposal to eliminate the taxation of tipped income, at least temporarily.  The language would allow a below-the-line deduction for certain tips received by an individual in an occupation in which tips are ordinarily received.  However, several requirements, including those relating to the nature of the tip, the characteristics of the individual receiving the tip, and the relevant industry, must be satisfied.  The provision would be effective for tips received on or after January 1, 2025, and would sunset after 2028—leaving its extension to a future Congress during a presidential election year.  In addition, the legislation would extend availability of the FICA tip tax credit under Section 45B of the Code, which currently applies to food and beverage establishments, to employers within the beauty service industry.Continue Reading House Reconciliation Bill Would Enact President Trump’s Campaign Promise to Eliminate Tax on Tips

Nearly 18 months into the pandemic, the IRS continues to issue guidance on the employee retention credit, a credit that was adopted in March 2020 and has been addressed in a number of articles on the Tax Withholding & Reporting Blog, most recently on August 3, 2021.

The latest guidance takes the form of Notice 2021-49 and Revenue Procedure 2021-33, which together address a range of topics, including how employers should treat cash tips for purposes of determining the amount of qualified wages, whether the credit may be claimed with respect to the same wages for which the employer receives the Code Section 45B credit, how the related individual rules work for determining qualified wages, and whether employers are required to file amended tax returns if they claim the employee retention credit retroactively.  The Service has also outlined a safe harbor that employers may apply to exclude from gross receipts the amount of the forgiveness of any PPP loans or the amount of shuttered venue operator grants or restaurant revitalization grants.
Continue Reading IRS Issues Additional Guidance on Employee Retention Credit