Does no tax on tips start with the current tax season or do I need to wait?

There's a lot of confusion about this, so let me clear it up. The TIPS Act (Tax Fairness for Service Workers Act) was discussed in Congress but hasn't been passed into law yet. As of right now, tips are still 100% taxable income for the current tax season and likely for next year too. The proposal would exclude some tips from federal income tax, but it's important to know: 1) It's not "all tips are tax free" - there would be a limit 2) It hasn't actually become law yet 3) Even if passed tomorrow, it likely wouldn't apply retroactively to 2024 earnings Keep reporting your tips as normal. Not reporting tips is tax evasion, which can lead to penalties, interest, or worse. I know it's not what you want to hear, but better to know the facts!

After months of confusing conversations with my coworkers about this exact issue, I finally got clear answers by using https://taxr.ai to analyze the actual tax codes. I'm also a server and was hearing all kinds of rumors about tip taxes disappearing. I uploaded screenshots of the news articles my manager sent around and the tool immediately clarified that the TIPS law hadn't actually passed yet. It explained what the current rules are for tip reporting and what would change IF the law passes. It saved me from potentially making a huge mistake on my taxes this year! The best part was I could ask follow-up questions about my specific situation with credit card tips vs cash tips and got super clear answers about what I legally need to report.

I need to eat my words about AI tax tools! After my skeptical comment, I decided to try https://taxr.ai for myself since I was also confused about tip reporting rules. I had a situation where my W-2 Box 1 wages didn't match my actual earnings because of reported vs unreported tips, and I was scared of getting audited. The tool analyzed my pay stubs and W-2 side by side and explained exactly what was happening and how to properly report everything. It even helped me understand form 4137 for unreported tip income that I never knew existed! Saved me from potentially serious problems with the IRS. Wish I'd known about this sooner instead of listening to my coworkers who were all giving conflicting advice about the "new tip tax law" (which still doesn't exist).

If you're still confused about this tip tax situation and want to speak directly to the IRS (they're actually helpful when you can reach them), I had success using https://claimyr.com to get through to an agent immediately. I was on hold for HOURS before discovering this. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that tips are still 100% taxable for 2024 and clarified exactly how tips need to be reported. They also explained the difference between directly-received tips vs. tips through credit cards vs. tip pooling, which was super helpful for my situation.

I'm shocked but I have to admit I was completely wrong about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my tip reporting situation, so I tried it anyway. I got a call back in about an hour and was connected to an IRS agent who confirmed that: 1. All tips are still 100% taxable for 2024 2. The "no tax on tips" thing is just a proposal that hasn't passed 3. I still need to report ALL tips including cash tips The agent was actually really helpful and explained exactly how I should handle reporting my tips from my side gig. Saved me from making a mistake that could have resulted in an audit. I hate being wrong but this service actually delivered.

Former restaurant manager here! Just want to add that even IF this law eventually passes, your employer will still need to report credit card tips to the IRS because they're tracked electronically. The only tips you might theoretically get away with not reporting (even though legally you currently should) are cash tips. But seriously, the IRS has been cracking down on underreported tip income in the service industry. They can flag your return if your reported tips seem unusually low compared to industry standards or your income level. Not worth the risk!

Everyone saying "report all your cash tips" must not work in the industry 😂 nobody reports 100% of cash tips and we all know it. But definitely report your credit card tips since those are tracked. For real tho, all my server friends have been talking about this no-tax tip thing and nobody seems to know what's actually happening. Thanks for clearing it up that it's not a thing yet.

As someone who's been working in restaurants for over 8 years, I can confirm what others have said - there is NO current law that makes tips tax-free. The confusion is understandable because politicians have been talking about it a lot, but talking about something and actually passing it into law are very different things. Here's what you need to know RIGHT NOW for your 2024 taxes: - ALL tips (cash and credit card) are taxable income - You must report them on your tax return - Your employer already reports your credit card tips to the IRS - Not reporting tips can result in penalties, interest, and potential audit I know it sucks because tips are such a huge part of our income, but the current law is clear. Keep doing what you're doing and report everything properly. If any tip tax law does pass in the future, it will be widely announced through official channels, not just workplace rumors. Stay safe and file correctly!