Tax Administration

Tip Income Reporting Can Be Increased Gao ID: GGD-86-119 September 30, 1986

In response to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) efforts to improve tip income reporting and the impact of the Tax Equity and Fiscal Responsibility Act's (TEFRA) tip income reporting requirements on both the food and beverage industry and tip income reporting.

GAO found that: (1) of the four IRS regions it visited, two were more active and successful in pursuing tip income nonreporting than the others; (2) tip income reporting has increased since the implementation of the new TEFRA reporting requirements; (3) food and beverage employers indicated that implementation of these new reporting requirements was not as costly as they originally projected; and (4) IRS districts used varying procedures in administering the TEFRA provision, which allowed employers a rate reduction from the reporting of 8 percent of gross receipts, which could result in inequitable treatment of taxpayers.


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