A new act presented to Congress would pro vide equitable tax treatment to law-abiding salon owners. The act, known as the Cosmetologists' Tax Fairness and Compliance Act of 2000, would extend the same tax fairness pro vision applied to the restaurant industry to cosmetology. The legislation would save most salon owners thousands of dollars by permitting them to claim a credit against their income tax for the employer's share of FICA tax (Social Security and Medicare) paid on tips paid to the employees by their clients.
Currently, salons are required to pay FICA taxes on tips paid to their employees, even though the employers do not pay the tip compensation to the employees or control the amount of tip compensation they receive. The credit would not be al lowed for SPCA tax (Social Security and Medicare tax paid by the self-employed) paid by individual salon owners and independent contractors on tips that they receive.
The act was introduced by Representative Nancy Johnson (R-CT) in the House of Representatives, and by Senator Rick Santorum (R-PA) in the Senate. Although Congress is not expected to act on the legislation in the clays before adjournment, the legislation will be reintroduced after the first of the year.
"This is an issue of fairness," says Johnson. "The restaurant industry gets a tax benefit for tips reported by its employees, as it should. This legislation simply extends the same tax fairness provision to the other major industry in which tip in come is commonplace cosmetology."
The proposed legislation would close a loop hole in a group of tax compliance provisions that are intended to encourage compliance with the tax law.