Illinois restaurants helping workers prepare for new "no tax on tips" rule for next tax season
Big changes are coming this tax season, with the new "no tax on tips" rule created by the Trump Administration's spending plan, the so-called "big, beautiful bill," and following the delays with the IRS electronic payment system this past tax season, taxpayers might want to start preparing now.
The Illinois Restaurant Association is already prepping workers for the new rule allowing tipped workers to deduct up to $25,000 in qualified tips from their taxes this coming tax season.
The Treasury Department has issued a list of 68 occupations covered by the new rule, including bartenders, servers, hairstylists, exercise trainers, tattoo artists, nannies, bellhops, golf caddies and more – industries where tipping is common.
"Make sure that what you receive tips for doing is on the list of things that qualify for the deduction," said Brittany Benson, a tax researcher and expert at H&R Block. "2025 is a bit of a transition year."
Benson said H&R Block is gearing up to help people with this change, especially since it's already late September.
"A lot of questions probably going to be coming in, especially considering the number of people who do receive tips who will likely want to take this deduction."
Illinois Restaurant Association president Sam Toia said they're preparing tipped workers, too, with so many in their industry impacted by this.
"No tax on tips could put up to $6.4 billion back in the pockets of the industry workforce. We know in Illinois it could be close to $246 million dollars," he said.
But the rule change follows a tricky 2024 tax filing season.
Some taxpayers who paid their taxes by the April 15 deadline received notices telling them they still owed money, due to delays with the IRS electronic payment system.
A report released this past summer revealed a backlog of 3.5 million individual tax returns, and detailed staffing issues within the IRS, with 22%, or 9,000, employees who help taxpayers cut from the payroll. A total of 26% of all IRS staff, or around 26,000 employees, have been cut agency-wide this year.
Recent reports indicated some of those workers might be rehired.
U.S. Sen. Tammy Duckworth got involved this summer. Her office said they just heard back from IRS, despite reaching out to them in June.
Benson's advice, in light of those issues and ahead of this change, for those impacted by the new "no tax on tips" rule, is to gather tip records early and go into tax season well-prepared.
"It's a really good idea to start collecting your own records of your tips now, maybe working with your employer now," she said.