Small Business Tax Fairness and Compliance Simplification Act

To amend the Internal Revenue Code of 1986 to simplify reporting requirements, promote tax compliance, and reduce tip reporting compliance burdens in the beauty service industry. 1. Short title This Act may be cited as the Small Business Tax Fairness and Compliance Simplification Act 2. Extension of credit for portion of employer social security taxes paid with respect to employee tips to beauty service establishments (a) Extension of tip credit to beauty service business (1) In general Section 45B(b)(2) (2) Application only to certain lines of business In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services: (A) The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary. (B) The providing of beauty services to a customer or client if the tipping of employees providing such services is customary. . (2) Beauty service defined Section 45B of such Code is amended by adding at the end the following new subsection: (e) Beauty service For purposes of this section, the term beauty service (1) Barbering and hair care. (2) Nail care. (3) Esthetics. (4) Body and spa treatments. . (b) Credit determined with respect to minimum wage in effect Section 45B(b)(1)(B) (1) by striking as in effect on January 1, 2007, and (2) by inserting , and in the case of food or beverage establishments, as in effect on January 1, 2007 without regard to section 3(m) of such Act (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2023. 3. Employer tip reporting safe harbor (a) In general Section 3121(q) (1) by striking so much as precedes of this chapter (q) Tips included for both employee and employer taxes (1) In general For purposes ; and (2) by adding at the end the following new paragraph: (2) Tip program safe harbor In the case of an employer who employs one or more employees who receive tips in the course of such employment which are attributable to the performance of beauty services (as such term is defined in section 45B) are considered remuneration for such employment under this section, no IRS tip examination with respect to such employer shall be initiated (except in the case of a tip examination of a current or former employee) if the employer— (A) establishes an educational program regarding applicable laws relating to proper reporting of tips received by employees for— (i) new employees, which shall include both verbal explanation and written materials, and (ii) existing employees, which shall be conducted quarterly, (B) establishes procedures for tipped employees to provide monthly reporting of cash and charged services and related tip income of at least $20 under section 6053(a), (C) complies with all applicable Federal tax law requirements applicable to employers for purposes of filing returns, and collection and payment of taxes imposed, with respect to tip income received by employees, and (D) maintains employee records related to— (i) contact information for such employees, and (ii) gross receipts from any services subject to tipping, and charge receipts for such services, for a period of not less than 4 calendar years after the calendar year to which the records relate. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2023. 4. Information reporting of income from space rentals in the beauty service industry (a) In general Subpart B of part III of subchapter A of chapter 61 Public Law 117–328 6050AA. Returns relating to income from certain rentals of space in the beauty service industry (a) Requirement of reporting Any person who, in the course of a trade or business and for any calendar year, receives rental payments from two or more individuals providing beauty services (as defined in section 45B(e)) aggregating $600 or more each for the lease of space to provide such services to third-party patrons shall make the return described in subsection (b) with respect to each person from whom such rent was so received at such time as the Secretary may by regulations prescribe. (b) Return A return is described in this subsection if such return— (1) is in such form as the Secretary may prescribe, and (2) contains— (A) the name, address, and TIN of each person from whom a rental payment described in subsection (a) was received during the calendar year, (B) the aggregate amount of such payments received by such person during such calendar year and the date and amount of each such payment, and (C) such other information as the Secretary may require. (c) Statement To be furnished to persons with respect to whom information is required (1) In general Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing— (A) the name, address, and phone number of the information contact of the person required to make such a return, and (B) the aggregate amount of payments to the person required to be shown on the return. (2) Furnishing of information The written statement required under paragraph (1) shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) is required to be made. (d) Regulations and guidance The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purpose of this subsection, including rules to prevent duplicative reporting of transactions. . (b) Clerical amendment The table of sections for subchapter A of chapter 61 of such Code is amended by adding at the end the following new item: Sec. 6050AA. Returns relating to income from certain rentals of space in the beauty service industry. . (c) Effective date The amendments made by this section shall apply to payments made after December 31, 2023. 5. GAO Study Not later than 5 years after the date of enactment of this Act, the Comptroller General shall conduct a study and submit to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Finance of the Senate a report detailing how the extension of the employer social security credit under section 45B

Summary: Small Business Tax Fairness and Compliance Simplification Act This bill expands the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips to include beauty service establishments. (Under current law, the credit is limited to tips received for providing, serving, or delivering food or beverages.) The credit applies to tips received in connection with providing beauty services to a customer or client if tipping employees who provide the service is customary. Beauty services include barbering and hair care, nail care, esthetics, and body and spa treatments. The bill also (1) establishes an employer tip reporting safe harbor for beauty service establishments, and (2) specifies reporting requirements for income received from renting space to individuals who provide beauty services. The employer tip reporting safe harbor for beauty service establishments provides an exemption from certain Internal Revenue Service tip examinations for employers who meet certain requirements for educational programs, reporting procedures, compliance with tax law, and recordkeeping. The Government Accountability Office must study and report on the impact of the extension of the employer social security tax credit on employers and employees.