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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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