Tipped workers in Nevada, particularly in Las Vegas, are facing challenges related to the misleading promise of “no tax on tips,” as experts reveal the complexities behind this claim. Debra Jeffries, a seasoned cocktail waitress and a member of the Culinary Workers Union for 45 years, expressed her dissatisfaction, stating, “Yeah, it’s quite a bait and switch from the campaign days to what it basically boils down to. And we’re not even sure what that boils down to.”
Recently, the U.S. Treasury Department and IRS have begun to provide insights into the “no tax on tips” provision included in new legislation. Legal expert Francine Lipman from UNLV clarified that this provision does not function as a straightforward exclusion. “It is a little bit misleading to say no tax on tips because there are some conditions precedent to getting that deduction,” she explained.
For workers like Jeffries, the implications are significant. Despite the promise, taxes will still be deducted from their paychecks initially, often leaving them feeling financially burdened. “We’re not getting tipped like we used to. And so I’m getting taxed on, if someone doesn’t tip me, you know, it’s kind of like I look at it like money out of my pocket,” she added.
During the tax season, tipped employees can claim deductions of up to $25,000. Lipman pointed out that Nevada is leading the way, largely due to strong unions that collaborate with both employers and the IRS to ensure tip reporting on W-2 forms is effective.
Ted Pappageorge, the Secretary-Treasurer for the Culinary Union, raised three primary concerns: the provision does not include all gratuities, married couples must file jointly to qualify, and the tax benefits are set to expire in 2028. “The billionaires got their big windfall tax cuts, and they’re permanent, but are a sunset for workers. And that’s a slap in the face to workers,” Pappageorge stated.
Lipman advised that tax provisions are typically difficult to rescind once enacted. “Generally speaking, tax provisions are sticky. Once you get them, it’s very hard for Congress to pull it back,” she noted.
In response to these developments, the Culinary Union is actively seeking to engage lawmakers in amending the legislation to provide better support for tipped workers ahead of the next tax season. Pappageorge remains hopeful, urging that if the process is handled correctly and the Treasury issues appropriate regulations, there could be real relief for workers. He emphasized the importance of understanding the nuances beyond the headline of “no tax on tips” and encouraged diligent filing practices to ensure that workers can maximize their potential deductions in April.
