by Sarah | Dec 15, 2025 | Tax
In 2025, there will be changes to qualified tips and overtime that will affect payroll tracking and W-2 preparation, and employers must understand them. The rules are more straightforward than they first appeared, but preparation is still necessary.
To stay compliant and support your employees as they claim the new tax benefits, here’s what you need to know.
No Special W-2 Reporting for Qualified Tips in 2025
When early versions of the One Big Beautiful Bill were introduced, employers were told they would have to report qualified tips and qualified overtime separately on the W-2.
That rule did not make it into the final law.
This means:
- No new boxes on the W-2
- No separate reporting categories
- No additional year-end payroll burden
The extra reporting requirement has been removed to keep the process simple for small business owners.
However, this doesn’t mean employers can ignore the new rules, and you will need to have adequate systems in place for accurate reporting beginning January 1, 2026.
Employers Must Still Track Qualified Tips Internally
Even without special W-2 reporting, employers must track qualified tips inside their payroll system. Employees will rely on accurate employer records when claiming their new deductions on their 2025 tax return.
To be considered qualified, tips must come from specific types of work.
What Counts As Qualified Tips?
The IRS uses a very clear standard:
Qualified tips must come from occupations that “customarily and regularly” received tips on or before December 31, 2024.
Establishing a cutoff date prevents employers from creating new tipped roles simply to take advantage of the tax benefit.
Occupations that typically qualify include:
- Servers
- Bartenders
- Hairstylists
- Nail Technicians
- Massage therapists
- Hotel bell staff
Tips that do not qualify include:
- Tips from roles created after 12/31/24
- Service charges or automatic gratuities
- Mandatory fees
- Tip pool payments to employees who were not historically tipped
- Tips in positions without a pre-2025 tipping history
If the occupation did not regularly receive tips before the cutoff date, those tips are not qualified.
How Qualified Overtime Works
Qualified overtime follows the same rules as qualified tips.
Employers must:
- Track overtime separately
- Confirm the employee’s role qualifies
- Maintain clear payroll records
Again, these amounts are not separately reported on the W-2. However, they must be available for employee tax filings.
What Employers Should Do Now To Prepare
When you begin preparation now, you will be in great shape come tax time. Use these tips to get started.
- Confirm the job roles that qualify.
Document every position that regularly received tips before December 31, 2024.
- Update your internal payroll categories.
Internal records must clearly show regular wages, tips, and overtime.
- Educate your managers and staff.
Help them understand which tips qualify and why accurate reporting matters.
- Review your time and payroll systems.
Make sure they can track qualified tips and overtime correctly.
- Keep clean, accessible records.
Employees may not be aware of the changes and will rely on your documentation when filing their 2025 tax returns.
Why Tracking Qualified Tips And Overtime Matters
Qualified tips and overtime can provide meaningful tax benefits for employees. When employers track these amounts correctly, workers receive the full benefit they’re entitled to.
Good preparation also protects employers from mistakes, confusion, and follow-up questions during tax season.
If you want someone who understands the details and can help you stay organized, contact me today for year-end support that keeps your business running smoothly.
by Sarah | Nov 28, 2025 | Tax
If you run a food business, you may be doing R&D (research & development) more than you realize. Many owners think that research & development only happens in labs or high-tech companies. But the truth is that everyday experimentation in a commercial kitchen often qualifies as R&D under the Internal Revenue Code sections 41. When it does, your business might be eligible for a meaningful tax-saving credit.
What is R&D for Food Businesses?
The IRS defines R&D as activities that pertain to creating or improving a product or process through experimentation based on science or engineering, not just guessing or random changes. You don’t need a lab coat, a research team, or a science degree.
If you’re experimenting to improve your food or operations, you may already be conducting qualified R&D.
Common examples include:
Recipe Development
Food businesses test recipes constantly, and many of these tests meet the IRS’s definition of testing.
This includes:
- Developing new flavors or seasonal items that involve experimentation.
- Reformulating products to be gluten-free, vegan, or allergen-friendly.
- Improving texture, rise, shelf life, or consistency.
- Reducing sugar and fat while keeping flavor.
If you have ever spent a day creating ten batches of a cookie until it “finally tastes right,” that’s R&D level experimentation.
Ingredient Testing
Trying new ingredients is a classic form of research.
Examples include:
- Testing alternative flours, sweeteners, or oils
- Comparing local vs. imported ingredients
- Switching to cost-effective ingredients
- Evaluating replacements that change texture or stability
Any time you ask, “Will this ingredient work better?” you are exploring technical uncertainty, a cornerstone of IRS-approved R&D.
Process Development
One of the most significant overlooked R&D areas is improving how food is produced.
This may look like:
- Adjusting bake times to improve consistency
- Reducing waste
- Updating equipment or workflow
- Extending shelf life
- Scaling a recipe from a small batch to large production
If you’re trying to make your process faster, safer, or more reliable, you may be doing R&D, even if you don’t call it that.
What Doesn’t Count As Research & Development?
Not everything in the kitchen qualifies. The IRS excludes:
- Routine cooking or daily production
- Administrative work
- Simple quality control
- Copying someone else’s recipe
- Marketing or branding tasks
R&D requires testing, uncertainty, and improvement, not just everyday operations.
Why R&D Matters: A Major Tax Saving Opportunity
Here’s the part most food business owners never hear about:
Food businesses may be eligible for the federal R&D Tax Credit, a proven tax-saving strategy that rewards innovation. Businesses claim it on Form 6765, and the credit applies to qualifying research expenses, such as labor, supplies, and testing.
If your recipe development or process improvements meet the IRS’s four-part test for R&D, your business could earn:
- A credit against income tax
- Payroll tax offsets
- Yearly tax savings that can grow as you grow
The value of the credit typically ranges between 5–10% of qualified research expenses. You may already be doing all the work required. You simply need documentation.
How To Document R&D In Your Food Business
You don’t need complex systems. Simple records work well.
Track:
- Test batches and recipe changes
- Ingredient or process experiments
- Notes on what worked and what didn’t
- Costs related to development
- Time spent on experimentation
Think of this as your behind-the-scenes innovation journal.
Many food business owners never realize they are conducting research & development and miss out on a significant tax-saving opportunity. If you test, tweak, adjust, or improve anything in your kitchen, you may already qualify.
If you are a food business owner who is conducting R&D without realizing it, let’s talk to evaluate your activities and maximize any available tax savings. Contact me today for a free consultation.
by Sarah | Nov 14, 2025 | Small Business Accounting
If you’re a small business owner, you should know about a small business tax break worth celebrating.
It’s not flashy, and there are no confetti cannons (unfortunately), but this 20% deduction can make a big difference in how much of your hard-earned money you actually get to keep.
The Qualified Business Income (QBI) deduction—also known as Section 199A—is one of the best small business tax breaks available and doesn’t look like it’s going anywhere anytime soon. It lets eligible business owners deduct up to 20% of their qualified business income, meaning you get to keep more of what you earn.
Let’s break it down in plain English (no IRS translator required).
What Is This Small Business Tax Break?
Think of the QBI deduction as a thank you from the IRS for running a business that helps the economy. If your business is a sole proprietorship, LLC, S corporation, or partnership, you might qualify for this 20% small business tax break.
If your business income “passes through” to your personal tax return, you can potentially deduct 20% of it. That’s a serious savings opportunity, without changing how you operate your business.
Who Qualifies for the QBI Deduction?
The short answer is that most small business owners do.
If your total taxable income is below $197,300 (single) or $394,600 (married filing jointly), you can likely claim the full deduction.
If you earn more than that, the IRS starts adding layers. It may depend on:
- How much your business pays in W-2 wages.
- The value of your business’s qualified property.
- Whether you’re in a “specified service” industry, such as law, accounting, or consulting.
Still, for the majority of small businesses, the QBI deduction delivers precisely what it promises, a real tax break that makes a difference.
Why This Small Business Tax Break Matters
There’s a reason tax professionals get excited about Section 199A. It helps entrepreneurs like you grow faster and plan smarter.
Here is how:
- You keep more cash. Lower taxes mean more money in your pocket (or business account).
- You can reinvest in growth. Upgrade your tech, hire help, or take a well-deserved break.
- It levels the playing field. C-Corps got their significant cuts in 2017. This deduction helps pass-through businesses stay competitive.
- You gain strategic flexibility. It can influence how you structure your business, pay yourself, and plan for the future.
- It’s teamwork in action. Working with your accountant ensures you get the full benefit without missing key details.
The Fine Print (Because There’s Always Fine Print)
The QBI deduction was introduced as part of the 2017 Tax Cuts and Jobs Act. It was recently made permanent in 2025. You can count on this small business tax break as part of your long-term tax planning strategy
Don’t Leave This Small Business Tax Break On The Table
Here is a friendly nudge: don’t assume you’re already getting this deduction. Have a conversation with your accountant and make sure you’re getting every dollar you’re entitled to receive.
When it comes to smart business moves, keeping more of what you earn is one worth celebrating.
Are you ready to make the most of your small business tax break?
Let’s chat about how Section 199A can put more money back in your pocket. Contact me today for a free consultation.
by Sarah | Oct 30, 2025 | Small Business Accounting
If you’ve been bracing for another round of 1099s, 2025 is giving small business owners a little breathing room.
Recent tax law changes are bringing some administrative relief, but don’t mistake that for a free pass. Even with higher thresholds and fewer forms hitting your mailbox, the income still counts, and compliance still matters.
Let’s break down what’s changing (and what isn’t) for the most common 1099s you may handle.
Form 1099-K: The Big Relief
For tax year 2025, third-party payment platforms like PayPal, Venmo, and Etsy won’t issue a 1099-K unless you’ve received over $20,000 and had more than 200 transactions.
However, the income is still taxable!
Even if you do not receive a 1099-K, payments for goods or services through apps or marketplaces still count as business income. Keep tracking them as if you’ll have to report every penny, because you will.
Form 1099-NEC & Form 1099-MISC: No Changes
The rules for contractor and miscellaneous payments are staying steady through 2025.
- Form 1099-NEC – Used for payments of $600 or more to non-employees (contractors and freelancers).
- Form 1099-MISC – Used for rents, prizes, legal settlements, royalties, and other non-service payments; also applies the $600 threshold.
Beginning with payments made in 2026, both forms will share a new $2,000 inflation-indexed threshold. That’s excellent news for future filing seasons, but until then, the $600 rule applies.
If you pay contractors or freelancers in 2025, make sure you collect a W-9 early so you are ready to send 1099s by January 31.
Don’t Confuse Fewer Forms with Less Reporting
The absence of a 1099 form does not erase your tax obligation.
If you earned money, you need to report it.
While these changes may lighten the administrative load, stay proactive.
- Collect W-9s early for every contractor, every time.
- Track payments by category. Separate services, rents, prizes, etc.
- Reconcile third-party platforms. Even if they don’t issue a 1099-K, your accounting system should reflect every payment.
- File on time. 1099-NEC forms must be sent to both the IRS and recipients by January 31. 1099-MISC forms are due by February 28 (paper) or March 31 (e-file).
Make Updates to Your Bookkeeping Systems
If you are handling your own 1099s or helping clients through it, 2025 is the perfect time to get your systems in shape before thresholds change again.
- Review your payment methods and make sure income isn’t scattered across personal and business accounts.
- Automate vendor tracking or use a spreadsheet that ties W-9 data to payments.
- Run a quarterly “1099 readiness check to avoid January chaos.
And if you work with a virtual operations partner (like SAP Virtual Resources LLC 😉), make this part of your regular financial maintenance so tax season feels organized instead of overwhelming.
Relief Doesn’t Replace Responsibility
2025 offers some well-deserved breathing room, but let’s be clear: the IRS still expects accurate reporting.
Higher limits for 1099-K forms don’t cancel your tax obligations. The $600 threshold for contractor and freelancer payment still applies for 2025.
Take advantage of the reduced admin stress, but stay diligent with your recordkeeping. Because the easiest tax season isn’t the one with fewer forms, it’s the one where you proactively have everything ready.
Ready to stop stressing over 1099s and start streamlining your systems?
Let’s make your business tax-season ready (and stress-free) before January sneaks up. Contact me today for a free consultation.
by Sarah | Oct 15, 2025 | Tax
If you’ve been putting off the purchase of new machinery, upgrading your delivery fleet, or replacing equipment, the changes to Section 179 in the IRS tax code are giving you a new reason to move forward.
Thanks to the new updates, business and manufacturing owners are entering what accountants call the Section 179 sweet spot. Equipment purchase can become more profitable for equipment purchased after January 15, 2025, through December 31, 2028 (and placed in service by December 31, 2031).
If you’ve ever wanted to know how Section 179 deductions really work (and when to use them), let’s talk strategy.
What is Section 179 and Why Should You Care?
Think of Section 179 as the IRS’s way of rewarding businesses that reinvest in themselves. Section 179 is a powerful IRS tax rule enabling you to deduct the purchase price of qualifying business equipment and software in the same year you buy and use it — rather than spreading the depreciation out over several years. The property must be used more than 50% of the time for business purposes. If it is used for both business and personal reasons, the deduction must be based only on the business use.
If your manufacturing business spends $250,000 on new machinery, you could deduct all $250,000 from your taxable income that same year, creating an instant impact.
The rule applies to things like:
- Manufacturing equipment and machinery
- Business vehicles (with certain weight restrictions)
- Office equipment and computers
- Business-use software or technology systems
- Improvements to commercial property (think HVAC, roofs, security systems)
For small and mid-sized businesses, that deduction can help to go from just breaking even to having a healthy cash cushion to reinvest in growth.
What Changed for 2025?
A tax reform under the One Big Beautiful Bill Act (OBBBA) was signed this year, introducing several updates that make this the ideal time to plan your purchases.
Here is what’s new:
- The Section 179 deduction limit jumped to $2.5 million.
- The phase-out threshold increased to $4 million.
- 100% bonus depreciation was restored for qualifying property placed in service after January 19, 2025.
- For manufacturers, specific qualified production property is eligible for special expensing rules through 2031.
These aren’t proposals or rumors. These changes are currently in effect, giving businesses a long, predictable window to plan equipment purchases strategically.
Why 2025-2031 is Being Called “The Sweet Spot”
The IRS and Congress gave business owners a predictable window of opportunity to plan capital investments without worrying about expiring benefits.
Here is what makes this time period unique:
- Full expensing is back: You can write off 100% of your qualifying purchases in the same year.
- Time to plan: You can schedule major upgrades strategically.
- Inflation indexing: The deduction limits rise each year.
- Bonus depreciation restored: Combine it with full expensing for maximum tax savings.
If you have been considering upgrading machinery, expanding your operations, or modernizing your systems, you’re standing in the most favorable tax environment we’ve seen in years.
How to Maximize Your Section 179 Deduction
The key is planning purchases around your cash flow and tax position to maximize the deduction without creating a taxable loss you can’t use.
Here is how innovative businesses are approaching it:
- Create a Purchasing Timeline
If you’re planning multiple upgrades, stagger them to stay under the phase-out threshold each year.
- Place In Service Before Year-end
The equipment must be in use, not just ordered or delivered, to qualify for the deduction.
- Finance Strategically
Section 179 applies even if you finance the purchase. You get the deduction now and pay off the equipment over time.
- Work With Your Accountant
Section 179 can’t create a net loss, but bonus depreciation can. An accounting professional can help you combine the two for maximum impact.
Example: A Manufacturer investing $500,000 in automation equipment this year could see an immediate tax reduction that funds next year’s growth.
Limitations To Keep In Mind
Like all good things in the tax world, Section 179 has rules and fine print:
- You must have taxable business income to claim Section 179.
- The equipment must be used for more than 50% of its time for business purposes.
- Used equipment is acceptable, provided it is new to you.
- State tax laws don’t always match federal rules, so check your state and local deduction limits.
- If you sell the equipment later, some of that deduction could be “recaptured.”
Section 179 is generous, but it’s not a free-for-all. Use it wisely, and it can become a powerful tool for business growth.
Don’t Miss Your “Sweet Spot”
Between 2025 and 2031, the stars have aligned for businesses and manufacturers ready to invest in growth.
If you’ve been waiting to modernize your operations, expand your production capacity, or upgrade your technology, Section 179 allows you to do it with serious tax savings.
Don’t wait until your accountant brings it up next spring. Plan your purchases now and utilize Section 179 strategically to make 2025-2031 profitable years for your business.
I’m always ready to talk strategy with you. Contact me today for a free consultation.
