FYI: 

President Donald Trump has recently expressed he will be signing an executive order aiming to exempt tips received by service workers—such as those in hospitality, bartending, and serving—from federal income taxation. This initiative is part of a broader effort to reduce the tax burden on working-class Americans.

Implementation and Legitimacy:

While the executive order has been signed, its immediate effect is limited. The U.S. Constitution grants Congress the exclusive authority to modify federal tax laws. Therefore, for this exemption to become effective, it requires legislative action from Congress to amend existing tax statutes. Until such legislation is passed, tips remain subject to federal income tax.

Potential Implications:

Exempting tips from taxation has sparked a range of discussions among economists and policymakers:

• Equity Concerns: Exempting tips from taxation could lead to disparities where two individuals with similar incomes are taxed differently based on the source of their earnings. This challenges the principle of equitable taxation.
  
• Impact on Workers: While the exemption aims to benefit service workers, there is concern that employers might adjust base wages downward, offsetting the intended financial relief. Additionally, reduced taxable income could affect calculations for benefits like Social Security and the Earned Income Tax Credit.
  
• Administrative Challenges: Implementing such an exemption would require clear guidelines to distinguish between tipped and non-tipped income, potentially complicating tax administration and compliance.

Next Steps:

For the proposed tax exemption on tips to take effect:

1. Legislative Approval: Congress must draft, debate, and pass a bill amending the current tax code to include the exemption.
2. Presidential Signature: Once passed by Congress, the President must sign the bill into law.
3. Regulatory Guidance: The Internal Revenue Service (IRS) would then issue detailed guidelines on the implementation and compliance requirements for taxpayers and employers.

As of now, tips remain subject to federal income tax. Service workers and employers should continue to report and withhold taxes on tipped income in accordance with existing laws until any official changes are enacted.

General Tax FAQs for TipBux Users

FAQs: Managing Taxes with TipBux

Managing your taxes as a service worker has never been easier, thanks to TipBux. This guide will answer common questions about tax reporting for your tips, explain how to utilize TipBux’s tracking features for income reporting, and recommend institutions to help you file your taxes effectively.

Yes. According to IRS guidelines, all tips—whether received in cash, through TipBux, or any other digital platform—are considered taxable income. This includes gratuities, shared tips, and bonuses.

TipBux simplifies tip tracking with the following features:

• Tip History: View a detailed log of every tip received, including the date, time, and amount. This ensures you have accurate records for income reporting.
• Deposits: Track deposits to your linked bank account to ensure all income is accounted for.
• Tips Sent and Received: Monitor your activity to maintain a clear overview of your finances.

Here are some tips for effective record-keeping:

• Daily Tracking: Use TipBux track all your tips made on the app.
• Monthly Summaries: As TipBux grows you'll be able to download a monthly report of your TipBux tips to simplify quarterly tax filing. As of January 2025 until further notice, each user must keep track of their summaries in bulk manually until an export feature is added. 
• Receipts for Expenses: Keep receipts for work-related expenses, as these may qualify for deductions.

If you’re self-employed or a service worker receiving tips, you may need to pay estimated taxes quarterly. These payments cover your income tax and self-employment tax.

• TipBux Advice: Use your tip history to calculate your estimated income and set aside 20-30% of your earnings for taxes.

Here are the steps:

1. Gather Records: Track your TipBux tip history and collect separate records of cash tips and expenses.
2. Use a Tax Filing Service: Choose one of the institutions below to file your taxes.
3. File Forms: If you’re self-employed, you’ll likely need to file Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax).

We’ve ranked the best platforms to file your taxes based on ease of use, features, and cost:

• Why It’s Best: Intuitive interface, excellent support for self-employed workers, and integration with financial tools.
• Cost: Free to $119 (plus state filing fees).
• Link: TurboTax

• Why It’s Great: Affordable with in-person support options. Ideal for service workers needing guidance.
• Cost: Free to $85 (plus state filing fees).
• Link: H&R Block

• Why It’s Useful: Budget-friendly and efficient for straightforward tax filings.
• Cost: Free to $54.95 (plus state filing fees).
• Link: TaxSlayer

• Why It’s Good: Affordable and straightforward, but limited support for complex filings.
• Cost: Free federal filing; $14.99 per state.
• Link: FreeTaxUSA

• Why It’s Considered: For personalized support, consider hiring a Certified Public Accountant (CPA) familiar with service industry taxes. Check reviews or get referrals in your area.

Include both digital and cash tips in your reported income. TipBux’s tracking feature can serve as your primary record, but don’t forget to log cash tips manually.

• View Tip History: Regularly review and reconcile your earnings.
• Track Deposits: Ensure all bank deposits match your tip history.

Common deductions for service workers:

• Uniforms or work attire.
• Tools or equipment needed for work.
• Travel expenses related to work.

Set aside a portion of your earnings monthly based on your estimated tax rate. Use TipBux reports to make accurate calculations.

If you have additional questions about managing your taxes with TipBux, contact us at TipBuxCare@outlook.com or visit the IRS’s official tips income page.