The Professional Beauty Association (PBA) and its members have announced their support of the Small Business Tax Fairness and Compliance Simplification Act.
The act, which was introduced in Congress February 25, 2019, would extend the current 45(b) FICA tax tip credit to salon and spa owners. Like those who work in the restaurant industry (to which this credit has been granted since 1993), salon and spa professionals receive a significant amount of their income via tips, which they are required by law to report.
Salon and spa owners do not receive any of the tip income, but are currently required to pay 7.65% FICA taxes on all employee income—including customer-paid tips. The FICA credit would help owners offset the administrative costs associated with “ensuring employee compliance on tip reporting, and allow business owners to reinvest in their business and employees,” the PBA said in a press release.
“FICA taxes on tipped income has cost small business owners hundreds of thousands of dollars a year, money that could have been utilized to hire additional employees and upgrade our salon,” said Serena Chreky of Andre Chreky, the Salon and Spa. “I am hopeful for the relief this legislation will provide to owners like myself as we compete to thrive in our economy.”