FICA Tax Tip Fairness

COVID-19 Update

Due to the enormous impact COVID-19 has had on salon businesses and the inability of many salons to adequately receive or use the Paycheck Protection Program in a way that would benefit their business, we are proposing Congress provide a lifeline to salons by temporarily extending the Section 45B FICA tax tip credit in H.R. 1349/S. 2634 to the salon industry, effective January 1, 2015.

The Small Business Tax Fairness and Compliance Simplification Act, known commonly in the beauty industry as the FICA Tax Tip Credit, would extend the current 45(b) FICA tax tip credit to salon and spa owners - a credit granted to restaurant owners in 1993 - while providing equality and increased compliance for America's small businesses in the salon and spa industry.

Like the restaurant industry, salon and spa professionals receive a significant amount of their income through tips, which by law must be reported as income. Beauty industry employers are responsible for paying the 7.65% FICA (Social Security and Medicare) taxes on all employee income, including customer-paid tips. Salon and spa owners do NOT receive any of this tip income yet are required to pay taxes on it.