Beauty salon owners may soon be covered under new tax credits for the tips they receive. 18th District Congressman Darin LaHood and Washington Democrat Congresswoman Suzan DelBene have introduced the Small Business Tax Fairness and Compliance Simplification Act.
The bill would extend the tax code’s Federal Insurance Contributions Act (FICA) tax tip credit — which is currently available only to the food service industry — to the tens of thousands of employer-based beauty service establishments where tipping is also customary. The FICA tax tip credit is part of an integrated compliance system that has been effective in ensuring the accurate reporting of tip income and reducing the tax gap. The credit acts as a reimbursement for the costs employers incur in accounting for tip income. By reducing the tax burdens for tipped employees as well as improving reporting of tip income, the resolution would provide equitable treatment to the beauty industry allowing them to support their employees and grow their businesses.
In a letter from ProBeauty.org, over 3300 salon owners and beauty professionals from across the U.S. expressed their support for the bill, which they say will reduce compliance burdens for thousands of small salons and barbershops around the country. LaHood said in a press release that the industry is mainly represented by women and minorities, and the law would further help them support their families with more income. The bill, introduced in February, is awaiting a roll call vote on the House Floor.