Tipping Trends and Tax Changes: What Payroll Departments Need to Know This Election Year

ARTICLE | October 29, 2024

Authored by Vasquez + Company

As the election season unfolds, significant changes to tax exemptions for tips have been proposed by the presidential nominees. The article, "What Your Payroll Department Should Know About Tips This Election Year," explores the current regulations surrounding tips and the potential implications of proposed changes for business payroll departments.

Key Points:

• Tipping Trends: Tipping practices have expanded beyond traditional sectors, now encompassing a wide range of services, significantly influenced by the COVID-19 pandemic.
• Tax Responsibilities: Tips are considered taxable income, with specific reporting and withholding obligations placed on both employees and employers.
• Service Charges vs. Tips: Understanding the distinction between service charges and discretionary tips is crucial, as they have different tax implications.
• Proposed Changes: Upcoming legislation could reshape how tips are taxed, potentially affecting payroll operations for businesses with tipped employees.

To stay compliant and informed, payroll departments must remain vigilant about evolving regulations and adapt accordingly.

For more information, read the full article here.

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