Posted on: March 22, 2022, 08:54h.
Last updated on: March 22, 2022, 01:23h.
Nevada’s two US Senators and the state’s most powerful labor union are calling on the IRS to reconsider its 2022 tip allocation rate.
US Sens. Catherine Cortez Masto and Jacky Rosen, both Democrats, wrote the Internal Revenue Service earlier this month. They asked the federal tax agency to meet with labor unions whose members will be most impacted by the 2022 tip allocation rate. The IRS temporarily reduced the tip allocation rate by 50-60% during the pandemic but has since resumed its normal tip allocation rate effective January 1, 2022.
Cortez Masto and Rosen argue that hospitality workers remain deeply impacted by the pandemic. And resuming a higher tip allocation rate will take more money from employees’ take-home pay.
With inflation soaring and nearly all costs of living on the rise, the Nevada Senators say the IRS should meet with relevant labor unions to find a mutually appealing tip allocation rate.
“The tip allocation rate affects tens of thousands of workers in Nevada and around the country, and they deserve a seat at the table at a time when they face higher rental and housing costs while hoping to work enough hours to make ends meet,” the senators said in their letter to the IRS.
Culinary Union Speaks Out
Cortez Masto and Rosen have requested that the IRS meet with hospitality unions and affected workers to discuss what a fair tip allocation might be for both sides. In Nevada, no trade group has more influence than the Culinary Union, the casino organization that represents 60,000 people employed by resorts in Las Vegas and Reno.
The IRS assumes an average tip rate of 8% on gross food and drink sales. Tipped workers are required to report their tips to their employers, which are then included as earnings on the employee’s W-2 income.
The IRS lowered its assumed tip rate in 2020 but has since resumed the 8% threshold for most tipped workers. The resumption means more tips will be subject to federal tax.
Why is the IRS going after working families instead of going after big corporations and the wealthy to pay their fair share?” asked Ted Pappageorge, secretary-treasurer for the Culinary Union. “President Biden promised not to raise taxes on working people, but the IRS is raising taxes on tips everywhere in Nevada.
“The Culinary Union is fighting back to protect workers and we are happy to have the support of our Senators Catherine Cortez Masto and Jacky Rosen. Hospitality workers in Nevada are still recovering from the COVID-19 pandemic, and that’s why the IRS needs to do the right thing and go back to a reduced pandemic tip allocation rate immediately,” Pappageorge concluded.
Las Vegas Rally Planned
With no meeting yet set with the IRS, the Culinary Union plans to hold a rally this week to voice the group’s stance that the 2022 tip allocation is too high. The Culinary Union will meet this Thursday, March 24, outside the Federal Building in Las Vegas at 11 am PST.
Though Cortez Masto and Rosen aren’t scheduled to attend the event, the Senators said the IRS should justify why the agency decided to restore the tip allocation rate so soon.
As of last month, more than 323,000 people were employed in hospitality careers in Nevada.