1.
This Act may be cited as the
Small Business Tax Equalization and
Compliance Act of 2005
.
2.
Expansion of credit for portion of social security taxes paid
with respect to employee tips
(a)
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:
(2)
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—
(A)
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
(B)
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.
.
(b)
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:
(c)
For purposes of this section, the term cosmetology
service means—
(1)
hairdressing,
(2)
haircutting,
(3)
manicures and pedicures,
(4)
body waxing, facials, mud packs, wraps, and other similar skin
treatments, and
(5)
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).
.
(c)
The amendments made by this section shall apply to tips received
for services performed after December 31, 2004.
3.
Information reporting and taxpayer education for providers of
cosmetology services
(a)
Subpart B of part III of subchapter A of chapter 61 of the
Internal Revenue Code of 1986 is amended by inserting after section 6050T the
following new section:
6050U.
Returns relating to cosmetology services and information to
be provided to cosmetologists
(a)
Every person (referred to in this section as a reporting
person
) who—
(1)
employs 1 or more cosmetologists to provide any cosmetology
service,
(2)
rents a chair to 1 or more cosmetologists to provide any
cosmetology service on at least 5 calendar days during a calendar year,
or
(3)
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, shall comply with the
return requirements of subsection (b) and the taxpayer education requirements
of subsection (c).
(b)
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.
(1)
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.
(2)
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.
(3)
(A)
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—
(i)
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
(ii)
furnishes to each cosmetologist whose name is required to be
set forth on such return a written statement showing—
(I)
the name, address, and phone number of the information contact
of the reporting person,
(II)
the amount received from such cosmetologist, and
(III)
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.
(B)
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.
(c)
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—
(1)
in the case of an employee, the tax and tip reporting
obligations of employees, and
(2)
in the case of a cosmetologist who is not an employee of the
reporting person, the tax obligations of independent contractors or
proprietorships.
The
publications shall be furnished either in person or by first-class mail which
includes adequate notice that the publication is enclosed.
(d)
For purposes of this section—
(1)
(A)
The term cosmetologist means an individual who
provides any cosmetology service.
(B)
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.
(2)
The term cosmetology service has the meaning given
to such term by section 45B(c).
(3)
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).
(e)
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.
.
(b)
(1)
Section 6724(d)(1)(B) of such Code (relating to the definition of
information returns) is amended by redesignating clauses (xiii) through (xviii)
as clauses (xiv) through (xix), respectively and by inserting after clause
(xii) the following new clause:
(xiii)
section 6050U(a) (relating to returns by cosmetology service
providers).
.
(2)
Section 6724(d)(2) of such Code is amended—
(A)
by striking or
at the end of subparagraph
(AA),
(B)
by striking the period at the end of subparagraph (BB) and
inserting , or
, and
(C)
by inserting after subparagraph (BB) the following new
subparagraph:
(CC)
subsections (b)(3)(A)(ii) and (c) of section 6050U (relating to
cosmetology service providers) even if the recipient is not a payee.
.
(3)
The table of sections for subpart B of part III of subchapter A
of chapter 61 of the Internal Revenue Code of 1986 is amended by adding after
section 6050T the following new item:
Sec. 6050U. Returns relating to
cosmetology services and information to be provided to
cosmetologists.
.
(c)The amendments made by this section shall apply to calendar
years after 2004.