GLOBAL PAYROLL MAGAZINE
15
: What Trump’s Tax n for Payroll Operations
Additional taxes and deductions get taken from the employee’s base wage paid by the employer, dropping net pay for tipped workers below what a similarly paid non-tipped worker would receive. This is because the tip amounts are to be added to gross wages before taxes are withheld.
“Making tips nontaxable would impact several tasks for those paying service employees who currently must report their tips as income.”
A basic principle of the U.S. tax code is that most cash or cash equivalents paid to workers are subject to income tax. Excluding these amounts from calculating taxable wages means several accumulators in Payroll systems would no longer be necessary, many forms and documentation requirements would go away, and additional withholding calculations that include tips with regular wages also would disappear.
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