Many older Americans are returning to work in restaurants, salons, casinos, hotels, and other service jobs to supplement retirement income. Recently, some of those workers have noticed smaller amounts being withheld from their paychecks and assumed their tip income is now completely tax-free. That misunderstanding is creating confusion for retirees who may not realize they could still owe money when tax season arrives. The issue largely stems from new IRS guidance tied to the “no tax on tips” deduction that took effect under recent federal tax changes. While the rules may reduce federal income taxes for some workers, experts warn that many seniors are misunderstanding how tip income taxes actually work.
