Business Tax​

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Below is a reminder of some important things that need to be done as part of your year-end accounting. There are three sections below, some or all of which may or may not apply to your particular situation.

If you have 10 or more information returns (this includes Forms 1099 and W2), you MUST file them electronically. See https://www.irs.gov/newsroom/irs-and-treasury-issue-final-regulations-on-e-file-for-businesses for more details.

New in 2025 - ​One, Big, Beautiful Bill Act (OBBBA) 

The One, Big, Beautiful Bill Act (OBBBA), effective for tax years 2025 through 2028, introduces significant new federal income tax deductions for individuals who receive qualified tips and qualified overtime compensation. It also imposes new information reporting obligations on employers and other payors.

DEDUCTION FOR QUALIFIED TIPS

• Employers and payors must file information returns with the IRS (or SSA for Form W-2) and furnish statements to employees/payees showing the amount of cash tips received and the occupation of the tip recipient. For tax year 2025, due to the phased implementation, Forms W-2 and 1099 will not be updated to separately report cash tips or occupation codes. Employers and payors are not required to separately account for cash tips or occupation on these forms for 2025. In practice however, employees will want this reported. 
  • For tax year 2025, due to the phased implementation Forms W-2 and 1099 will not be updated to separately report cash tips or occupation codes. Employers and payors are not required to separately account for cash tips or occupation on these forms for 2025. (In practice however, employees will want this reported). The IRS will not impose penalties under IRC §§6721 or 6722 for failing to separately report these amounts or occupation codes, provided the return or statement is otherwise complete and correct. Employers are encouraged (but not required) to provide this information through alternative means (e.g., Box 14 of Form W-2, supplemental statements, online portals, etc.) to help employees claim the deduction.
• Definition of Qualified Tips - Cash or charged tips (including those received through tip-sharing arrangements) that are:
  • Paid voluntarily by customers, not subject to negotiation, and not required as a condition of service.
  • Not received in the course of a trade or business that is a specified service trade or business (SSTB). For employees, this is determined by the nature of the employer’s business.
• Eligible Individuals: Employees and self-employed individuals in occupations that customarily and regularly received tips on or before December 31, 2024, as determined by the IRS. The IRS is required to publish a list of such occupations, and taxpayers may rely on the proposed list for 2025 here
• Deduction Limits:
  • Maximum annual deduction: $25,000.
  • For self-employed individuals, the deduction cannot exceed the net income from the trade or business in which the tips were earned (before this deduction).
  • The deduction phases out for taxpayers with modified adjusted gross income (MAGI) over $150,000 ($300,000 for joint filers).
• Taxpayer must include their Social Security Number on the return.
• Married individuals must file jointly to claim the deduction.

DEDUCTION FOR QUALIFIED OVERTIME COMPENSATION

• Employers and payors must file information returns and furnish statements to employees/payees showing the total amount of qualified overtime compensation paid during the year. For tax year 2025, Forms W-2 and 1099 will not be updated to separately report qualified overtime compensation. Employers and payors are not required to separately account for qualified overtime compensation on these forms for 2025. 
  • For tax year 2025 Forms W-2 and 1099 will not be updated to separately report qualified overtime compensation. Employers and payors are not required to separately account for qualified overtime compensation on these forms for 2025. The IRS will not impose penalties under IRC §§6721 or 6722 for failing to separately report these amounts, provided the return or statement is otherwise complete and correct. Employers are encouraged (but not required) to provide this information through alternative means (e.g., Box 14 of Form W-2, supplemental statements, online portals, etc.) to help employees claim the deduction.
    
    • Begin tracking and communicating qualified tip and overtime information to employees and payees to facilitate their deductions. Consider updating payroll and HR systems in anticipation of required reporting for 2026 and beyond.
      
    • Forms W-2 and 1099 will be updated for 2026 to require separate reporting of qualified tips, qualified overtime compensation, and occupation codes.
      
• Eligible Individuals: Employees (and certain non-employees) who receive overtime compensation required under section 7 of the Fair Labor Standards Act (FLSA), i.e., pay for hours worked in excess of 40 in a workweek at not less than one and one-half times the regular rate of pay.
• Only the “premium” portion required by the FLSA (the “half” in “time-and-a-half”) is deductible.
• Overtime paid in excess of FLSA requirements (e.g., double time, state law requirements, or collective bargaining agreements) does not qualify.
• Overtime paid to FLSA-exempt employees does not qualify.
• Qualified tips (as defined above) are excluded from the definition of qualified overtime compensation.
• Deduction Limits:
  • Maximum annual deduction: $12,500 ($25,000 for joint filers).
  • Deduction phases out for taxpayers with MAGI over $150,000 ($300,000 for joint filers).
• Married individuals must file jointly to claim the deduction

2025 Form 1099's

If applicable, your business needs to send Form 1099’s to required recipients on or before January 31, 2026.  The IRS website gives more details, but in general nonemployee compensation needs to be reported to any individual, unincorporated business (including LLC’s unless taxed as a corporation), or attorney or law firm (even if incorporated) that you paid $600 or more to for services (not goods) or rents, or $10 or more in interest an during the calendar year in total whether by check, cash, etc. (do NOT include amounts paid by credit or debit card).

The government copies of the Forms need to be remitted to the IRS on or before January 31, 2026 as per the instructions or penalties could be assessed.

For those of our clients who use QuickBooks or Sage Peachtree or similar software, these programs can produce the 1099’s if the payees/vendors who need to be issued a 1099 are marked as such in the vendor set-up and their expense category is marked as a 1099 type expense.

We can help you prepare these forms and help calculate totals paid to each vendor, but ultimately you are responsible for providing us with the correct vendor information and amount paid. 

The penalties for failure to comply with the 1099 filing requirements have greatly increased (click here for more details)) and so have IRS enforcement efforts in the area. Please note that intentional disregard to file these forms could result in a $680 per form penalty with no limitation on the maximum amount of a penalty. 

S-Corp >2% Shareholder Health Insurance Premiums

The IRS requires that company paid health insurance premiums for S-corporation owners who own 2% or more of the stock in the corporation as well as owners of LLC’s taxed as S-corporations be reported on the W-2 and Form 941. You should report this to your payroll service provider ASAP. This amount goes in box 1 wages but is not subject to social security or Medicare taxes (FICA) or unemployment taxes. There should be no federal or state withholding. This is simply a reporting requirement, and the amount of the premiums included on the W-2 is deductible from income on the owner’s personal income tax return. Remember, this amount is also reflected on your 4th quarter payroll tax returns. The total health insurance premiums paid in 2025 for more than 2% S-corporation owner(s) must be included on line 1 of the Form 941 return.  The premiums are not included on line 5a or 5c, however. On the more than 2% shareholder’s 2024 W-2, the total health insurance premiums paid in 2025 for each more than 2% S-corporation owner must be included on their respective W-2’s in boxes 1 and 16 (and box 18 if applicable).  In addition, the premium amount should be listed in box 14. If you use a payroll service, your payroll provider will know what to do, but if you have any questions or need any help, please feel free to contact us. 

Personal Use of Company Car

​If you or any of your employees have a company owned vehicle that is used personally as well, the IRS requires written records be maintained by employers to document the business and personal use of employer provided vehicles. This worksheet will provide you or us with the information needed to calculate the value of the personal use portion of the company automobile that needs to be added to the final paycheck of the year. The personal use value should be added to your or the employee’s final 2025 paycheck as gross wages, subject to all taxes (federal, social security, Medicare, state, local and unemployment) just like any other wage, and then the same personal use value amount should be deducted from the net paycheck.

Either you can complete the worksheet, or you can fill out the top portion and send it back and we will calculate the personal use portion. This should be done ASAP to ensure the amount is reported on your payroll prior to yearend.