Cant file
When will the issue be resolved that prevent filing stating the IRS has not finalized the instructions for filing no tax on tips
Best Answer
-
Hello Allen,
We're currently waiting for the IRS to finalize their instructions regarding the No Tax on Tips deduction for people who received tips on a 1099-MISC, 1099-NEC, or 1099-K. We don't have an exact date from the IRS but anticipate it will be soon.
Once the IRS provides the final instructions, we'll update our software right away to accommodate the changes. We'll notify you as soon as the update is complete so you can file your return.0
Answers
-
2/6/26 - I spoke to a gentleman at the IRS yesterday. I am self-employed. I can't claim the No Tax on Tips deduction YET in your software. He said I absolutely am ALLOWED to claim this deduction even without having a 1099! I can file the Schedule 1-A and then the figure goes onto Line 13b of the 1040 as additional deduction. But Free Tax USA cannot accommodate this.
The IRS person said I can wait to see if your platform can get up to speed with the new law; since I am getting a refund, he said we technically don't have to file our taxes by April 15, we have 3 years to file our returns when owed a refund. But obviously, that means I am letting the government gain interest on my money. He said I can also file manually on paper; which to me is going to be a big pain in the ****. It would be so much easier to file online.
The other issue with waiting 3 years to file (which I'm not going to do) is that: I OWE my school tax. The school tax is based on my State return and my State return is based on my Federal return. So I really am not allowed to wait to file.
I really hope all the tax online platforms get up to speed sooner rather than later on the self - employed and no tax on tips issue.
1 -
Hello Ohio,
The law, IRS guidance, and IRS 2025 1040 Instructions specifically mention that the tips must appear on a Form 1099 to be deductible.
"Only amounts that appear in the aggregate on Forms 1099 can be considered qualified tips. Any “cash tips” received. . . in actual cash that don’t appear on Form 1099-K cannot be included in the deduction." (page 104 of the Form 1040 instructions , see TIP below example 2.)
You can also refer to this guidance from the IRS regarding qualified tips and qualified overtime compensation (see pages 16-17).
0 -
Has there been any updates on the self-employed "no tax on tips" added to the software?
0 -
There hasn't been any update. Only tips reported on a W-2, 1099-K-, 1099-NEC, or Form 4137 are eligible for the deduction.
This is the actual language in the legislation. It seems pretty clear to me.
‘‘SEC. 224. QUALIFIED TIPS. ‘‘(a) IN GENERAL.—There shall be allowed as a deduction an amount equal to the qualified tips received during the taxable year that are included on statements furnished to the individual pursuant to section 6041(d)(3), 6041A(e)(3), 6050W(f)(2), or 6051(a)(18), or reported by the taxpayer on Form 4137 (or successor).
1 -
@JMSSGV Well this is the actual wording on the IRS website.
No tax on qualified tips for self-employed income
Beginning in 2025, you may be eligible to take a deduction for qualified tips you received in 2025. You can’t deduct more than $25,000 of those tips. The deduction is claimed on Schedule 1-A (Form 1040) not on your Schedule C. See Schedule 1-A (Form 1040) and its instructions for more information.
FreeTaxUSA does not have this feature as of yet to file a schedule 1-A. Seems pretty clear to me….
0 -
There's nothing in the language you posted that suggests that you can deduct tips that don't meet the requirements of the law.
Are you suggesting that FreeTaxUSA is not generating a Schedule 1-A where appropriate? If you enter tips that meet the requirements of the law (i.e., they were reported on a W-2, 1099-NEC, 1099-K, or 4137), Schedule 1-A will be created by the software.
5 -
Are you an IRS tax agent? I am not sure where all your passive aggressiveness is coming from? As seen in previous comments, another person had spoken to the IRS asking about the self-employed tax deduction. You do not need a provide an employer form (1099-NEC, etc) if you are self-employed and qualify under the types of positions. Yes, FreeTaxUsa is not current with providing a schedule 1-A form for people who use a Schedule-C to claim business income.
0 -
Please let me know if you find any other tax software that allows you to generate a Schedule 1-A for the tip deduction without a 1099-NEC or other required form that includes the tip income. This exact same discussion can be found on forums for other tax software, with exactly the same responses.
0 -
Hello MorMar,
The IRS Instructions for Form 1040 specifically state on page 104, "Only amounts that appear in the aggregate on Forms 1099 can be considered qualified tips."
I realize that this is a frustrating limitation for those who receive tips, but no Forms 1099. However, that is the current limitation of the law. There will be no update in the software to enter information directly to Schedule 1-A for tips.1
