Donald Trump’s proposal to eliminate taxes on tips means that income earned through tips would no longer be subject to federal income taxes. Here’s an overview of what this could entail and the potential pros and cons:

What it Means
• Current System: Under the current U.S. tax system, tips are considered taxable income. Employees who earn tips are required to report them to their employer, who then includes the tips in the employee's wages for tax purposes.
• Proposed Change: If tips were no longer taxed, employees would not have to report tip income on their tax returns, and this income would not be subject to federal income tax.

Pros
1. Increased Take-Home Pay: Workers in service industries, such as waitstaff and bartenders, would keep more of their earnings, potentially increasing their disposable income.
2. Simplified Tax Filing: Employees who rely heavily on tips would have a simpler tax filing process, as they would no longer need to track and report tip income.
3. Boost to Service Industry: Higher take-home pay might improve job satisfaction and retention in service industries, which often experience high turnover rates.
4. Economic Stimulus: More disposable income for service workers could translate into increased consumer spending, which might boost the economy.

Cons
1. Revenue Loss: The federal government could lose significant revenue from the taxes currently collected on tip income, which might impact funding for public services and programs.
2. Inequity: Critics might argue that this policy disproportionately benefits service industry workers while ignoring other low-income workers who do not receive tips.
3. Enforcement Issues: Determining what constitutes a tip versus other forms of income might become complicated, leading to potential abuses and loopholes.
4. Employer Reporting: Employers would still need to monitor tips to ensure compliance with minimum wage laws, adding complexity to payroll management.

Potential Impact
• On Workers: Service workers would benefit directly through increased take-home pay, potentially leading to better financial stability for those in low-wage, tip-reliant positions.
• On Employers: Employers might see indirect benefits through improved employee satisfaction and reduced turnover, but they would still need to navigate the complexities of tip reporting for wage compliance.
• On Government Finances: The federal government would need to address the potential shortfall in tax revenue, possibly requiring adjustments in other areas of the budget or tax system.

What do YOU think??

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The IRS released its annual 'Dirty Dozen' campaign, renewing a warning about companies sometimes referred to as Offer in Compromise 'mills'. The IRS notes that these 'mills' aggressively promote Offers in Compromise (OIC) and create the illusion that the IRS hands these out like Oprah handed out free cars on her big giveaway shows - 'And you get an OIC! And you get an OIC! Everybody gets an OIC!!!'

If you want to make sure you're calling a reputable tax resolution firm, a quick Yelp or Better Business Bureau search can reveal ALOT. You can usually tell who the bad actors are when you read the same complaint mentioned in terrible review after terrible review - usually some iteration of 'They said they could considerably reduce what I owed the IRS. I paid them thousands of dollars, they've done nothing, and now with all the penalties and interest piled on top of what I already owed, I'm in worse shape than before I hired them!'

The OIC program allows eligible taxpayers with an unpaid tax debt to negotiate a settled amount that is less than the total taxes owed, to clear the debt.

The IRS considers an Offer in Compromise based on the taxpayer’s ability to pay, income, expenses, and asset equity. It’s essentially a compromise between the taxpayer and the IRS to settle the tax debt for less than the full amount under certain circumstances.

The Offer in Compromise program is meant to provide relief for taxpayers who are genuinely unable to pay their tax debts. It’s not for individuals who merely want to avoid paying their taxes.

Rush Tax offers a FREE IRS transcript investigation and analysis UPFRONT - and a FREE pre-qualification consultation to see if you qualify for an Offer in Compromise.

Check out some of our actual client results here!

An experienced tax professional can navigate the IRS's rules, statutes, and payment options to help you find the best way to eliminate your tax debt. Take the guesswork out of paying off your debt by speaking with a tax professional today.

CONTACT RUSH TAX RESOLUTION TODAY!

There are a lot of things that can trigger an IRS audit. Simply put, the IRS identifies them as red flags because they potentially increase the likelihood of one of two things - you are under-reporting income or over-reporting deductions.

High-Income Taxpayers with Unsettled Debts:
The IRS created the 'High Wealth, High Balance Due Taxpayer Field Initiative' to prioritize high-end collections targeting those with over $1 million income and $250,000+ in tax debt.

Partnerships and Pass-Through Entities:
The IRS uses AI to identify possible compliance risks and intensify examinations of large and complex partnership returns covering industries like hedge funds and publicly traded partnerships. These partnerships have an average of over $10 billion in assets.

Transactions Involving Digital Assets:
The IRS is cracking down on transactions involving digital currencies after a reported potential for a 75% non-compliance rate among taxpayers.

Form 1099 and Document Matching Reporting:
Not reporting your entire income greatly increases your odds of getting audited. The IRS compares the amounts submitted on forms like 1099, W-2, and K-1 with the amounts you report on your return.

Profit and Loss in Business (Schedule C):
Taxpayers running businesses should avoid abusing deductions, maintain meticulous records, and allocate personal and business expenses separately to decrease their chances of being audited.

Employer Retention Credit Submissions:
The IRS is taking steps to stop the many abuses of the Employer Retention Credit. They are offering a window where taxpayers who submitted questionable claims can withdraw an ERC claim that hasn't yet been paid, and/ort a voluntary disclosure program for those who did not meet eligibility requirements and want to repay the funds received.

Gig Work and Side Hustles:
Earnings from side hustles must be reported, emphasizing accurate income reporting and potential self-employment tax payments, whether you received Form 1099 or not.

Home Office Expense Deductions:
Deducting home office expenses requires strict adherence to rules, including dedicated office use, and may necessitate proving expenses in case of an IRS audit.

Distinguishing Business from Hobby:
Writing off expenses for a business is allowable - writing off expenses for a hobby is not. If your business hasn't shown a profit in at least three out of five years, the IRS will view your business as a hobby. Proper books and records are crucial for businesses to establish legitimacy.

Cash-Based Businesses:
Cash-based businesses, especially those with tips, must maintain diligent record-keeping to avoid IRS scrutiny, including reporting large cash transactions through Form 8300.

Foreign Financial Accounts:
If the IRS suspects that you have $10,000 or more in foreign financial accounts and have not filed a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), or if they believe you reported incorrectly or have misreported values on the FBAR, you may be subject to audit. this will more than likely trigger an audit.

Abusive Tax Scheme Transactions:
The IRS has ongoing investigations meant to identify and halt taxpayers engaging in abusive tax schemes. Emerging scams involve the earned income tax credit, sick leave and family leave as well as false fuel tax credit claims.

An experienced tax professional can navigate the IRS's rules, statutes, and payment options to help you find the best way to eliminate your tax debt. Take the guesswork out of paying off your debt by speaking with a tax professional today.

CONTACT RUSH TAX RESOLUTION TODAY!

The IRS and 'Customer Service'?

The IRS isn't exactly known for its customer service. The majority of calls to its 'customer service' line remain unanswered, despite the IRS being gifted a huge budget increase as part of the equally ironically named 'Inflation Reduction Act'.

We decided, out of curiosity, to look up the word 'customer' in the dictionary.

Oxford Dictionary revealed there are two definitions for the word.

Only one fits the description of what the IRS would consider a 'customer':

cus·tom·er
/ˈkəstəmər/
noun
noun: customer; plural noun: customers
1.
a person or organization that buys goods or services from a store or business.
"Mr. Harrison was a regular customer at the Golden Lion"

2.
a person or thing of a specified kind that one has to deal with.
"the fish is a slippery customer and very hard to catch"

Facing an IRS problem can be an incredibly challenging experience. We at Rush Tax love helping people navigate their way out of their tax issues. We offer a free consultation, free IRS transcript investigation, and then we’ll let you know, upfront and for free, if we can help – and we ONLY take cases we KNOW we can help.

Like This One!

We were thrilled to get this wonderful review on the Better Business Bureau from one of our clients/customers:

Michael B.
5 stars
1/9/2024

“Michelle is the best Consultant I have ever worked with, and I have worked with many Tax Consultants in my past 50+ years in business. I am very pleased with the working relationship we have had and she guided me thru to a truly satisfactory resolution to situation. I can’t express how grateful I am for the assistance I received from all the folks at Rush Tax Resolution, and especially Michelle. I will highly recommend Rush Tax Resolution if asked and especially Michelle!”

An experienced tax professional can navigate the IRS's rules, statutes, and payment options to help you find the best way to eliminate your tax debt. Take the guesswork out of paying off your debt by speaking with a tax professional today.

CONTACT RUSH TAX RESOLUTION TODAY!

The IRS is 2024's 'comeback kid':

According to IRS Commissioner Danny Werfel, the IRS is making strategic moves with its hefty funds from the Inflation Reduction Act. They've been channeling the money into revamping employee training and upgrading one of its oldest IT systems. Armed with nearly $60 billion in multi-year funds, the IRS is actively reshaping its workforce and modernizing IT infrastructure to enhance its service to taxpayers.

The IRS is under an incredible amount of pressure to deliver a return on investment from these allocated funds. The agency's top priority now is hiring approximately 20,000 full-time employees to increase its enforcement and compliance teams by the close of 2024. The IRS is gaining momentum, with plans to fast-track the hiring of more than 3,700 highly trained agents across the country. And there are no signs of slowing down - they're on the verge of reaching 90,000 full-time employees—a staffing milestone that hasn't been seen in over a decade.

An experienced tax professional can navigate the IRS's rules, statutes, and payment options to help you find the best way to eliminate your tax debt. Take the guesswork out of paying off your debt by speaking with a tax professional today.

CONTACT RUSH TAX RESOLUTION TODAY!