The IRS will define who counts as a tipped worker and what counts as a tip

The US Treasury Department and the IRS are defining which jobs "customarily and regularly" receive tips. They are also defining what a "qualified tip" is for tax deduction purposes. This will affect how employers report income and how workers claim deductions.

For years, the rules around tipped income have been vague, leading to disputes and inconsistent tax reporting. This new definition will clarify who is eligible for certain tax benefits and how employers must track tips. It means less ambiguity for both workers and businesses in industries like hospitality and service.