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Tipped workers aren’t holding their breath for Trump and Harris’ proposals

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A craps table at a Las Vegas casino

David Becker/Photographer: David Becker/Getty

From the valets parking cars to the dealers at the blackjack tables to the bartenders at the city’s many bars, Las Vegas relies on people working for tips.

“Las Vegas was built on tips,” said James Reza, a city native who owns two high-end beauty salons in town.

Around 17% of workers in Nevada — the highest concentration in the country — make their living through tipped work, according to the Center for Business and Economic Research at the University of Nevada Las Vegas. Nationwide, tipped workers only account for about 2.5% of all workers, according to Yale’s Budget Lab.

To boost the incomes of these workers and win over voters in the crucial swing state where union power still holds weight, Vice President Kamala Harris and former President Donald Trump have both vowed to end taxes on tips.

Interviews with dozens of bartenders, rideshare drivers, servers, and small business owners in Las Vegas reveal the proposal, a centerpiece of national policy discussions, is certainly popular. Yet Nevadans are also clear-eyed about the candidates’ electoral intentions and befuddled by how this new system would actually work.

“I don’t know how much it would benefit them if it actually happens,” Reza said, referring to service workers.

Lawmakers of both parties, while quick to embrace the idea coming from the top of their presidential tickets, admit they haven’t nailed down exactly what taxes will be exempted from tips and who would still pay.

“For me, the devil will be in the details of all of this,” said Rep. Susie Lee, D-Nevada, whose district includes parts of Las Vegas.

Harris announced her intention to push for the tax benefit at a rally last week at the University of Nevada, Las Vegas. Meanwhile, after igniting the discussion with a “no tax on tips” promise in June, Trump is returning to Las Vegas Friday to reinforce his pitch to workers.

“It would be amazing” if tips became tax-exempt, said Daniel Cervantes, a bartender at CraftHaus Brewery in Las Vegas’ Arts District. “It would help me afford a better home, a place closer to work.”

Tax balancing act

President Joe Biden has signaled support for tax-free tips, as well as top congressional leaders, Senate Majority Leader Chuck Schumer, D-N.Y., and House Speaker Mike Johnson, R-Louisiana.

The challenge, though, is writing a law that balances offering maximum benefit for workers while also ensuring that it won’t become a tool for wealthy tax dodgers.

Republicans recently introduced legislation with support from some Nevada Democrats. Rep. Steven Horsford. D-Nevada, has said he’ll introduce his own bill soon.

Tips account for nearly 10% of underreported income that makes up the tax gap, the difference between taxes paid and taxes owed, according to a 2019 Treasury watchdog report. When it was last measured in 2006, tips represented $23 billion of the $235 billion in total underreported income, Treasury found. Cracking down on noncompliance among tipped workers is a challenge for the IRS, said Ric D. Hulshoff, a Las Vegas tax attorney who previously worked at the agency.

Lawmakers say they want income and industry limitations, a new definition of what a tip is, and other potential guardrails to prevent abuse by wealthy, non-tipped workers and employers.

Both Lee and her Republican challenger for the swing district, Drew Johnson, support an income cap and restricting the benefits to certain industries. Lee said she wants to ensure that “Wall Street hedge fund managers” can’t claim their bonuses as tips.

Keeping the benefits limited to the service industry is Johnson’s “biggest concern,” he said, adding that he would support proposals that also exempt tips from federal payroll taxes.

‘God bless the IRS’

Unions and workers say they’ve had a tense history with the IRS on tip reporting since agents in the 1980s came to casinos and sat behind blackjack tables checking how much dealers were taking home in tips.

Workers said it’s not unusual to go through an entire shift without many tips, particularly when serving tourists from cultures where generous gratuities aren’t the norm. Some workers still must pay tax on the tips the IRS expected them to receive, though, due to some agreements casinos have with the agency in which workers pay taxes based on tip averages.

Tipped employees may still face audits, too. The Legal Aid Center of Southern Nevada has partnered with local unions on a program that provides legal assistance for workers under audit.

Exempting tips from taxes might be a chance for a new relationship between the IRS and Nevada’s tipped employees.

“God bless the IRS,” quipped Leain Vashon, who’s been bell captain at the Paris Hotel for nearly 25 years, and is a member of the Culinary Workers Union Local 226. “I’m not looking to get rid of taxes totally. I just want to be able to have a fair tax for me and for everyone else who’s working.”

Local 226, which represents over 60,000 service workers in Las Vegas and Reno, Nevada, and holds strong sway in the state’s politics, has been instrumental in bringing the tax-free tips to the top of the Democratic agenda. The union’s Secretary-Treasurer Ted Pappageorge initially called Trump’s idea an “empty promise,” but was quick to mobilize with the Nevada delegation to endorse a bill from Sen. Ted Cruz, R-Texas, that would provide a 100% deduction for tipped wages, and introduce their own.

Pappageorge said the union also held conversations with Harris’ team ahead of her endorsement of the idea.

“We have relationships,” he said. “If there’s any discussion going on about gratuities and involves our members, we’re going to be in the conversation.”

Just a political move?

Despite building excitement around the tax-free tips proposals, Las Vegas workers and businesses remain skeptical.

“It’s definitely a double-edged sword,” said John Simmons, owner of the tapas restaurant Firefly off the Las Vegas Strip. “I want people to have a break, but then I also see that these politicians are using it in order to buy votes.”

Cervantes, the bartender, said it will ultimately come down to Congress to pass legislation codifying the proposal. Neither one of the candidates can act unilaterally if they take over the White House in 2025, he said.

While Pappageorge and lawmakers say they’ll make good on this promise, business owners and employees won’t count on any proposal until Congress makes serious moves.

Until there’s a law, “nobody will know who this helps and how much,” said P Moss, a Las Vegas and New York City restaurant owner.

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House passes tax administration bills

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The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all endorsed this week by the American Institute of CPAs, and passed two others as well.

  • H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
  • H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
  • H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
  • H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.

“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”

The bills were also included in a recent Senate discussion draft aimed at improving tax administration at the IRS that are strongly supported by the AICPA.

The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter. 

  • H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
  • H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS. 

House  Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.

“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”

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Accounting

In the blogs: Many hats

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Teaching fraud; easement settlement offers; new blog on the block; and other highlights from our favorite tax bloggers.

Many hats

  • Taxbuzz (https://www.taxbuzz.com/blog): There’s sure an “I” in this “teamwork:” What to know about potential IRS and ICE collaboration.
  • Tax Vox (https://www.taxpolicycenter.org/taxvox): How IRS data would likely be unhelpful validating SNAP eligibility.
  • Yeo & Yeo (https://www.yeoandyeo.com/resources): How financial benchmarking (including involving taxes) can help business clients see trends, pinpoint areas for improvement and forecast future performance.
  • Integritas3 (https://www.integritas3.com/blog): One way to take a bite out of crime, according to this instructor blogger: Teach grad students how to detect, investigate and prevent financial fraud.
  • HBK (https://hbkcpa.com/insights/): Verifying income, fairly distributing property, digging the soon-to-be-ex’s assets out of the back of the dark, dark closet: How forensic accounting has emerged as a crucial element in divorces.

Standing out

Genuine intelligence

  • AICPA & CIMA Insights (https://www.aicpa-cima.com/blog): How artificial intelligence and other tech is “Reshaping Finance,” according to this podcast. Didem Un Ates, CEO of a U.K.-based company offering AI advisory services, tackles the topic.
  • Taxjar (https:/www.taxjar.com/resources/blog): How AI and automation can help even the knottiest sales tax obligations and problems.
  • Dean Dorton (https://deandorton.com/insights/): Favorite opening of the week: “The madness doesn’t just happen on college basketball courts — it also happens when your finance team is stuck using a legacy on-premises accounting system.”
  • Canopy (https://www.getcanopy.com/blog): Top client portals for accounting firms in 2025.
  • Mauled Again (https://mauledagain.blogspot.com/): Despite what Facebook claims, dependents have to be human.

New to us

  • Berkowitz Pollack Brant (https://www.bpbcpa.com/articles-press-releases/): This Florida firm offers a variety of services to many industries and has a good, wide-ranging blog. Recent topics include the BE-10, nexus and state and local tax obligations, IRS cuts and what to know about the possible bonus depreciation phase out. Welcome!

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Accounting

Is gen AI really a SOX gamechanger?

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By streamlining tasks such as risk assessment, control testing, and reporting, gen AI has the potential to increase efficiency across the entire SOX lifecycle.

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