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119-s-1998119th CongressWALLET

Small Business Tax Fairness and Compliance Simplification Act

Sponsored By: Senator Scott, Tim [R-SC]

Introduced

Summary

Would extend the employer tip credit to beauty service businesses. It would also create a safe harbor for employer tip reporting in beauty services and require information reporting for rentals of space used by beauty professionals.

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  • Beauty service businesses — Salons, barbers, nail and spa providers would become eligible for the employer tip credit only if employer-counted tips for beauty services exceed 15% of gross receipts in a year. This change would apply to tax years beginning after December 31, 2024.
  • Employers — Businesses that follow the safe harbor steps would be protected from IRS tip examinations. Requirements include quarterly employee education, monthly employee tip reporting for amounts of at least $20, and keeping records for 4 years.
  • Space rental hosts — Any business that receives rental payments from two or more beauty-service providers totaling $600 or more in a year would have to file information returns showing each payee’s name, TIN, aggregate payments, and dates, and must furnish payees a statement by January 31.

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 2 benefits, 1 costs, 0 mixed.

Tip tax break for beauty employers

This bill would let employers claim the Social Security tax credit for tips from certain beauty services as well as food and drink. For beauty services, you could claim the credit only if tips counted are more than 15% of your beauty-service gross receipts in the tax year. The change would apply to tax years starting after December 31, 2024. The bill also keeps the existing January 1, 2007 minimum-wage baseline language for food and drink places.

IRS safe harbor for beauty tips

If enacted, this would protect qualifying beauty‑service employers from most IRS tip audits. To use the safe harbor, employers would need to give new hires verbal and written tip‑reporting training, train existing staff quarterly, set up monthly tip reporting for amounts $20 or more, follow federal tax filing and collection rules for tips, and keep records for four years. The safe harbor would apply to tax years starting after December 31, 2025.

New rental reporting for salons

This bill would require businesses who get rental payments from two or more beauty workers to file an IRS return and give each worker a statement if each worker paid $600 or more in a year. The return must show each payee's name, address, tax ID, the total paid, and dates and amounts of each payment. Payees must get their statement by January 31. The rule would apply to payments made after December 31, 2025.

Sponsors & CoSponsors

Sponsor

Scott, Tim [R-SC]

SC • R

Cosponsors

  • Sen. Alsobrooks, Angela D. [D-MD]

    MD • D

    Sponsored 6/9/2025

  • Sen. Cassidy, Bill [R-LA]

    LA • R

    Sponsored 6/11/2025

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
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