Help with No Tax on Tips for self employed worker that doesn't make enough to get a 1099

[cckeeler]

I need help identifying if my daughter has any options to take advantage of the No Tax on Tips tax change this year.   She is self employed and does nails.  Most of her payments go through Venmo including tip which does actually show up if she gets a statement.  The issue that I am running into is that because she doesn't bring in over $20K in payments Venmo does not issue a 1099.  So is she out of luck?  If she was making more money she would qualify for the deduction,  but because she isn't making enough she can't?  Seems like the bill isn't really helping the people that need it he most if that is the case.   

[SharonD007]

Self-employed taxpayers that work in a line that receives tips are eligible to take the deduction. Tips are reported on Schedule C and are capped at Net Income.

Resources for No tax on Tips:

IRS guidance for individuals who received tips or overtime during tax year 2025

The Tipped Worker's Guide

Tip Recordkeeping and Reporting

[NCperson]

@SharonD007 - 

While all worldwide income must be reported, and that would income tips as income on Sch C for someone who is self-employed, the 'no tax on tips' benefit would only be available if reported on a 1099.

See this link:

https://www.irs.gov/newsroom/one-big-beautiful-bill-how-to-take-advantage-of-no-tax-on-tips-and-over...

and specifically this line: 

Taxpayers may be able to claim a deduction for qualified tips paid to them in 2025 that are included on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or reported directly by them on Form 4137.

So if the tips are not reported on a 1099-NEC, MISC, K, then how is there a benefit? The OP states they did not receive a 1099. 

[cckeeler]

Right,  no 1099 because her total in payments did not exceed the $20K threshold for Venmo to issue a 1099.

[Vanessa A]

So then she is not able to claim the deduction.  Right now, self-employment tips aren't eligible for the deduction if they are not reported to the IRS on a 1099-K, 1099-NEC, or 1099-MISC.  In order to be deducted, they must be reported on a 1099 for self-employed individuals.   There has been no guidance issued from the IRS to state otherwise as of yet.  However, as you walk through the interview mode, and enter your income as cash, there is a box for you to check that says "This includes cash tips" just in case this changes.  You can check that box, BUT, at this point you will not see a deduction for it. 

[cckeeler]

That's too bad.  Really excludes a good portion of the people that would benefit from this deduction.  I'm told the Venmo $ Threshold used for 1099 distribution went went up from $5K to $20K in 2025.  So if she was able to make more money she would pay less taxes,  but because she doesn't make enough she pays more.  Doesn't seem like these rules were thought through all the way.   

[NCperson]

@cckeeler  that would presume Congress is always logical 😉