Taxes and Tips: How Radium Payments Simplifies Tip Reporting for Employees and Employers in Light of New Legislation

Tips have always been an essential part of many service industry jobs, but the complexity of reporting them has historically been a headache for employees and employers alike. With the introduction of the No Tax on Tips Act earlier this year, tip-related tax laws are poised to change, potentially making the process even more difficult.

Luckily, Radium Payments makes the entire tip reporting process simple and seamless for both employers and employees. Whether under the current tax law or in light of the proposed changes, Radium ensures that tips are properly tracked and reported, so you can focus on what matters most—running your business or doing your job.

Radium’s Role in Simplifying Tip Reporting under Current Tax Law

Currently, employees who receive cash tips are required to report tips exceeding $20 per month to their employer. Employers then use this information to withhold payroll taxes and ensure that all tips are accounted for when it comes to tax filings. However, manually tracking and reporting tips can be tedious and error-prone—especially for employees working in industries like restaurants, beauty services, or hospitality.

This is where Radium Payments steps in. Radium’s payment system allows for instant, seamless tracking and reporting of tips. Employees don’t have to worry about carrying around cash or fumbling through paper receipts. Radium’s technology automatically records and reports tips in real-time, making tax reporting much more accurate and efficient.

For employers, Radium makes it easy to manage tip data and integrate it directly with payroll systems. This reduces the administrative burden of tracking individual tips, ensuring that both employees and employers remain compliant with tax reporting requirements. Radium also streamlines the payment process, so employees can focus on their work without stressing over the accuracy of their tip reporting.

The No Tax on Tips Act: What’s Changing?

Introduced in the Senate on January 16, 2025, the No Tax on Tips Act could bring significant changes to tip reporting laws. Here’s a breakdown of how the bill might affect both employees and employers:

1. New Tax Deduction for Tips

The bill proposes a tax deduction of up to $25,000 for tips. This new deduction would apply to cash tips received by employees in industries that typically receive tips (e.g., waitstaff, bartenders, beauty service professionals). The catch? Employees must report these tips to their employer for payroll tax purposes, just like the current law requires.

2. Eligibility Requirements

Employees making over $160,000 annually (adjusted for inflation) would not be able to claim this deduction. The bill is designed to benefit those whose compensation is tip-dependent, rather than high earners in other fields. This new provision could significantly reduce the tax burden for employees in sectors like restaurants and beauty services, where tips play a large role in income.

3. Expanded Business Tax Credit

Another key provision of the bill is an expanded business tax credit for payroll taxes that employers pay on tips. Previously, this credit only applied to tips related to food and beverage services. Under the new law, it will also apply to tips received in beauty and wellness services, such as haircuts, manicures, massages, and other spa treatments. This change would make it easier for beauty businesses to take advantage of the same payroll tax relief that food service industries already benefit from.

How Radium Makes Tip Reporting Easy for Both Employees and Employers

Regardless of whether the No Tax on Tips Act passes or not, Radium Payments is already set up to handle tip reporting in a way that complies with current laws and could easily adapt to new changes.

1. Seamless Tip Tracking

With Radium, tips are automatically recorded in real-time whenever a payment is made. Employees don't have to worry about reporting tips manually—Radium ensures that tips are accurately tracked and automatically available for reporting when needed. This ensures that employees can easily comply with current tax laws, where tips over $20 must be reported to their employer.

2. Simplified Payroll Integration

Radium’s reporting tools allow employers to automatically integrate tip data with payroll systems, making tax filings more efficient. No more manually entering tip amounts or sorting through piles of receipts. This is especially important in industries where tips are a significant portion of employees' income. Employers can rest assured that tips are correctly reported for tax purposes, saving both time and effort.

3. Future-Proof for New Laws

As the No Tax on Tips Act moves forward, Radium is prepared to make the transition smooth for businesses and employees. The platform is already designed to capture and report tip data in a way that aligns with the requirements of the new bill, including the new tax deduction for cash tips and the expanded business tax credit for beauty services.

Conclusion

The introduction of the No Tax on Tips Act has the potential to make tipping tax laws much more beneficial for employees in tip-heavy industries. For businesses, the expansion of the business tax credit to beauty services is a welcome change, and the new deduction for tips could offer significant savings. But whether or not the bill passes, Radium Payments ensures that businesses and employees can easily manage tip reporting and stay compliant with current tax laws.

Radium simplifies the entire process, from real-time tip tracking to automated payroll integration. This ensures that employees don’t have to worry about missing tips or failing to report them, and employers can reduce the administrative burden of tax filings. By streamlining tip reporting, Radium helps businesses and employees alike focus on their work while ensuring that they remain compliant with tax laws—no matter how they evolve.

Ready to simplify tip reporting for your business? Contact Radium Payments today and see how we can help you stay ahead of tax season—both now and in the future.