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Issue 41402

Pub 531

Project Statement: Evaluate clarity and completeness of tip reporting instructions for self-employed taxpayers.

Goal Statement: The goal of this project is to recommend to the IRS that current instruction in Pub. 531 be revised to clarify tip reporting requirements for self-employed taxpayers and improve the taxpayer’s experience.

TAP RECOMMENDATION

ID 1729 Pub 531, page 6, Self-employed persons

Current: Self-employed persons. If you receive tips as a self-employed person, you should report these tips as income on Schedule C. See Pub. 334, Tax Guide for Small Business, for more information on reporting business income.

Suggested: Self-employed persons. If you receive tips as a self-employed person, you should report these tips as income on Schedule C or Schedule C-EZ. See Pub. 334, Tax Guide for Small Business, for more information on reporting business income.

Justification: Self-employed persons need to report tips on either a Schedule C or C-EZ. Leaving off reference to a Schedule C-EZ may confuse the taxpayer into believing unless they use a Schedule C, tips do not need to be reported. Pub. 334 provides guidelines for both Schedule C and C-EZ so to provide consistency, it is important to include the reference to Schedule C-EZ. To ensure the taxpayer’s right to pay the correct tax, it is important that they have a clear area to report all income received throughout the year.

IRS Action:Not adopted

ID 1729

IRS is rejecting this suggestion because Schedule C-EZ was made historical (obsolete) beginning in Tax Year 2019/Processing Year 2020. Therefore, referring to it in other products would be incorrect.

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2019 TAP Annual Report

The 2019 TAP Annual Report highlights our key recommendations to improve IRS customer service and summarizes our key accomplishments and activities, including the 224 recommendations submitted to the IRS in 2019.

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