III. Affected Entities and Taxpayers

By providing clarity to the statutory definition of “qualified tips” and publishing the statutorily required list of occupations that customarily and regularly received tips on or before December 31, 2024, the proposed regulations affect taxpayers who wish to claim the deduction for qualified tips on their individual income tax returns beginning in taxable year 2025. Using confidential tax return data, the Treasury Department and the IRS estimate that, in 2026, more than 10 million returns will have tips reported on Form W-2, Form 1099-NEC, Form 1099-K, Form 1099-MISC, or Form 4137.