H. R. 1957
IN THE HOUSE OF REPRESENTATIVES
May 24, 2011
Mr. Sam Johnson of Texas (for himself and Ms. Berkley) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to expand the tip tax credit to employers of cosmetologists and to promote tax compliance in the cosmetology sector.
This Act may be cited as the
Small Business Tax Equalization and
Compliance Act of 2011.
Expansion of credit for portion of social security taxes paid with respect to employee tips
Expansion of credit to other lines of business
Paragraph (2) of section 45B(b) of the Internal Revenue Code of 1986 is amended to read as follows:
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 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, or
the providing of any cosmetology service for customers or clients at a facility licensed to provide such service if the tipping of employees providing such service is customary.
Definition of cosmetology service
Section 45B of such Code is amended by redesignating subsections (c) and (d) as subsections (d) and (e), respectively, and by inserting after subsection (b) the following new subsection:
For purposes of this section, the term cosmetology service means—
manicures and pedicures,
body waxing, facials, mud packs, wraps, and other similar skin treatments, and
any other beauty-related service provided at a facility at which a majority of the services provided (as determined on the basis of gross revenue) are described in paragraphs (1) through (4).
The amendments made by this section shall apply to tips received for services performed after December 31, 2010.
Information reporting and taxpayer education for providers of cosmetology services
Subpart B of part III of subchapter A of chapter 61 of the Internal Revenue Code of 1986 is amended by inserting after section 6050W the following new section:
Returns relating to cosmetology services and information to be provided to cosmetologists
Every person (referred to in this section as a reporting person) who—
employs 1 or more cosmetologists to provide any cosmetology service,
rents a chair to 1 or more cosmetologists to provide any cosmetology service on at least 5 calendar days during a calendar year, or
in connection with its trade or business or rental activity, otherwise receives compensation from, or pays compensation to, 1 or more cosmetologists for the right to provide cosmetology services to, or for cosmetology services provided to, third-party patrons,
The return requirements of this subsection are met by a reporting person if the requirements of each of the following paragraphs applicable to such person are met.
In the case of a reporting person who employs 1 or more cosmetologists to provide cosmetology services, the requirements of this paragraph are met if such person meets the requirements of sections 6051 (relating to receipts for employees) and 6053(b) (relating to tip reporting) with respect to each such employee.
In the case of a reporting person who pays compensation to 1 or more cosmetologists (other than as employees) for cosmetology services provided to third-party patrons, the requirements of this paragraph are met if such person meets the applicable requirements of section 6041 (relating to returns filed by persons making payments of $600 or more in the course of a trade or business), section 6041A (relating to returns to be filed by service-recipients who pay more than $600 in a calendar year for services from a service provider), and each other provision of this subpart that may be applicable to such compensation.
In the case of a reporting person who receives rent or other fees or compensation from 1 or more cosmetologists for use of a chair or for rights to provide any cosmetology service at a salon or other similar facility for more than 5 days in a calendar year, the requirements of this paragraph are met if such person—
makes a return, according to the forms or regulations prescribed by the Secretary, setting forth the name, address, and TIN of each such cosmetologist and the amount received from each such cosmetologist, and
furnishes to each cosmetologist whose name is required to be set forth on such return a written statement showing—
the name, address, and phone number of the information contact of the reporting person,
the amount received from such cosmetologist, and
a statement informing such cosmetologist that (as required by this section), the reporting person has advised the Internal Revenue Service that the cosmetologist provided cosmetology services during the calendar year to which the statement relates.
Method and time for providing statement
The written statement required by clause (ii) of subparagraph (A) shall be furnished (either in person or by first-class mail which includes adequate notice that the statement or information is enclosed) to the person on or before January 31 of the year following the calendar year for which the return under clause (i) of subparagraph (A) is to be made.
Taxpayer education requirements
In the case of a reporting person who is required to provide a statement pursuant to subsection (b), the requirements of this subsection are met if such person provides to each such cosmetologist annually a publication, as designated by the Secretary, describing—
in the case of an employee, the tax and tip reporting obligations of employees, and
in the case of a cosmetologist who is not an employee of the reporting person, the tax obligations of independent contractors or proprietorships.
For purposes of this section—
The term cosmetologist means an individual who provides any cosmetology service.
The Secretary may by regulation or ruling expand the term cosmetologist to include any entity or arrangement if the Secretary determines that entities are being formed to circumvent the reporting requirements of this section.
The term cosmetology service has the meaning given to such term by section 45B(c).
The term chair includes a chair, booth, or other furniture or equipment from which an individual provides a cosmetology service (determined without regard to whether the cosmetologist is entitled to use a specific chair, booth, or other similar furniture or equipment or has an exclusive right to use any such chair, booth, or other similar furniture or equipment).
Exceptions for certain employees
Subsection (c) shall not apply to a reporting person with respect to an employee who is employed in a capacity for which tipping (or sharing tips) is not customary.
6724(d)(1)(B) of such Code (relating to the definition of information returns)
is amended by striking
or at the end of clause (xxiv), by
and at the end of clause (xxv) and inserting
or, and by inserting after clause (xxv) the following new
section 6050X(a) (relating to returns by cosmetology service providers), and
of such Code is amended by striking
or at the end of
subparagraph (GG), by striking the period at the end of subparagraph (HH) and
, or, and by inserting after subparagraph (HH) the
following new subparagraph:
subsections (b)(3)(A)(ii) and (c) of section 6050X (relating to cosmetology service providers) even if the recipient is not a payee.
The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding after the item relating to section 6050W the following new item:
Sec. 6050X. Returns relating to cosmetology services and information to be provided to cosmetologists.
The amendments made by this section shall apply to calendar years after 2010.