” In the United States, the Internal Revenue Service (IRS) established in 1963 that tips received by service employees were to be treated as taxable income, akin to wages and salaries. This recognition was further reinforced by the passage of the Federal Insurance Contributions Act (FICA) in 1974, which included tips in the definition of wages for Social Security and Medicare tax purposes. These legal measures aimed to ensure consistency in the treatment of income and fair taxation.
Several relevant tax laws and regulations govern the taxation of tips. The Internal Revenue Code (IRC) serves as the primary source of federal tax law in the United States, providing guidelines for reporting and withholding requirements related to tip income. Employees are required to report cash tips received within a calendar month to their employers, while employers have obligations to collect and report tip income, allocate tips among employees if necessary, and withhold income and payroll taxes on tip income. Form 8027, the Employer’s Annual Information Return of Tip Income and Allocated Tips, assists employers in accurately reporting tip income.
The rationale behind taxing tips encompasses multiple factors. First and foremost, consistency in the tax treatment of income is essential. Treating all forms of income equally helps maintain fairness and prevents preferential treatment of certain types of earnings. Taxing tips ensures that individuals who receive tips contribute their fair share to the tax system and prevents an unfair advantage compared to individuals in other occupations who do not receive tips. Furthermore, taxing tips promotes fairness and equity within the tax system by distributing the tax burden more equitably.”
https://factsontaxes.com/why-are-tips-taxed/
Those who wish to ensnare and control Americans know how to use a paper trail. How exactly to these paragons justify taxing an amount for expected tips based on the Government estimates even when the staff has not received tips?