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 | 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.
by Sarah | Aug 15, 2025 | Tax
What would it feel like to walk into next year’s tax deadlines feeling calm, confident, and thoroughly prepared?
If tax season shows up faster than expected, you are not alone.
Small business owners can take control of their tax preparation early so that the stress of last-minute scrambling becomes a thing of the past. Getting a head start on your small business accounting now can save you time, money, and a whole lot of headaches later.
Let’s look at five tips to help you prepare for tax season and why it’s one of the smartest moves you can make for your business.
Know Your Key Tax Deadlines
Learn what dates are essential to your company. Then, mark your calendar with the filing dates, adding an advanced reminder.
Some important 2026 deadlines are:
- January 31, 2026 – Deadline for 1099s and W-2s
- March 16, 2026 – Filing deadline for S-Corps and Partnerships (Form 1120S/ 1065)
- April 15, 2026 – Deadline for individuals and sole proprietors (Form 1040/Schedule C)
- Quarterly Estimated Payments – Due April 15, June 15, September 15, and January 15 (for 2025 Q4)
Each of these dates can impact your reporting obligations and potential penalties, especially if you’re working with contractors or running payroll.
A good practice is to set reminders now and share them with your bookkeeper or accountant so nothing gets missed.
Book A Mid-Year Financial Checkup
Practice a mid-year business wellness visit.
Before tax season hits, review the state of your finances.
- Are your books reconciled each month?
- Have all expenses been categorized correctly?
- Is income from every source tracked?
- Are you separating business and personal expenses?
Mid-year is the ideal time to uncover any errors or missing documentation.
Gather Documentation (Before It Disappears)
You may be surprised how much gets lost by year-end.
Start collecting and organizing the following now:
- Receipts for business deductions (travel, equipment, software, etc.)
- Mileage logs if you drive for business.
- Payroll and contractor payment records.
- Any 1099 contractor information (W-9s, contracts, etc.)
Create a shared folder for all digital files where you and your accountant can drop files. Create a dedicated labeled folder to keep paper files in one place.
Plan For Year-End Business Deductions
Strategic year-end tax planning can make a significant impact—schedule time on your calendar to do it.
Depending on your income and goals, you may want to:
- Invest in new equipment or software before December 31.
- Contribute to a SEP IRA or solo 401(k).
- Prepay for services.
These decisions can’t be made wisely if you wait until the week before tax deadlines.
Schedule A Year-End Strategy Session
This is your chance to take a proactive role in your business’s financial future.
In a short session, I can help you:
- Review your estimated taxes and projected income.
- Identify deductible expenses you may have overlooked.
- Discuss whether your current business structure still works for you.
- Prepare yourself for the upcoming tax deadlines so nothing falls through the cracks.
Small business owners who check in before tax time are often the ones who end up with lower stress levels and smaller tax bills.
Preparedness Is A Profit Strategy
There’s more to tax season than forms and deadlines. The key is how well you manage your business throughout the year with the right systems and planning. Preparation makes tax time easier.
Don’t wait until January to get organized. If you need assistance, book a Tax Prep Strategy Session with me today, and let’s set your business up for success in 2026.
👉Contact me today!
by Sarah | Jan 10, 2025 | Tax, Uncategorized
By opting for a tax review before filing your taxes this year, you can significantly reduce the anxiety that often accompanies tax time. Maybe ENJOY is a stretch, but you will feel better than you usually feel at tax time. The stress of unorganized books, juggling deadlines, and the possibility of making a costly mistake can be overwhelming, even for the most confident business owners.
As the owner of SAP Virtual Resources, LLC, I have seen how this proactive step can save time, money, and stress for busy entrepreneurs.
The Value of a Professional Review
Spot Errors Before the IRS
Even the most meticulous business owner can make bookkeeping mistakes. Common mistakes like missed deductions, miscategorized expenses, or duplicate entries may not be obvious when you are in the thick of tax preparation while continuing your daily business activities. They may not seem significant, but they can lead to larger problems.
An accountant’s trained eye can catch these and other mistakes. A tax review can ensure your financials are accurate and compliant with IRS regulations, reducing your chances of an audit or incurring penalties.
Expert Advice on Deductions and Credits
The complex and ever-changing tax laws require attention to detail. It is easy to overlook valuable deductions and credits that can apply to your business. There are several small business tax credits that you may qualify to use.
An accountant who offers a tax review stays current on the latest tax regulations to help you take advantage of all opportunities. They can help you with your current year’s taxes and help you implement new strategies for the following year.
Save Time and Reduce Stress
Get Back to Running Your Business
Once your information is ready, you can submit it for a professional tax review. This allows you to refocus on running your business, knowing that your books are in the capable hands of an expert. It’s time to do what you do best with the peace of mind that comes from professional oversight.
Prevent Costly Mistakes
Significant financial consequences can be the result of minor bookkeeping issues. A misplaced decimal point or a forgotten receipt can make a difference. Without a tax review, these issues may go unnoticed, leading to penalties and additional stress. An accountant can address many problems before they escalate, potentially saving you from these consequences.
Prepare for Growth and Audits
Insights into Business Health
A tax review helps you understand your business’s financial health. An accountant can identify business trends, cash flow issues, or areas where you can improve profitability. This information can help you make sound decisions about the future of your business.
Audit Readiness
Any business owner feels chills at the thought of an IRS audit. Being prepared for the possibility is priceless. An accountant can verify that your records are complete, accurate, and defensible, reducing the likelihood of complications if you receive an audit notification.
Tailored Advice for Your Business
Custom Tax Strategies
Your business is unique, and cookie-cutter advice doesn’t always work. After a tax review, an accountant can provide you with a tailored tax strategy based on your industry, goals, and financial position. Their expertise can help you plan retirement contributions, time purchases of business assets, or navigate unique deductions.
Invest With Confidence
A professional tax review is an investment in your business’s financial health and your peace of mind. The clear benefits include saving time, reducing stress, and a business set for future success.
Be proactive and make tax time stress-free. (You may even ENJOY it!) Contact me to discuss a tax review today.
by Sarah | Sep 28, 2020 | Tax
Did you know that the 1099-MISC has been changed for 2020? An old tax form that hasn’t been used since the early 80s is being brought back, the 1099-NEC (Nonemployee Compensation). This form is for payments of more than $600 made to any independent contractors, freelancers, consultants, and vendors in the course of your business during the year. This would include an electrician that you hired to wire in a condenser that you installed; a drywaller that worked for you on a broken pipe repair job; or a virtual assistant that you hired to design your website.
If you have paid any independent contractor more than $600 this year, you will need to file a 1099-NEC with the IRS instead of the 1099-MISC that you have been filing. Box 1 will be used for reporting what was paid to the independent contractor, Box 4 is where you will enter any amounts that you held for backup withholding requirements which is when a tax id number (TIN) was not provided, the IRS informs you that the TIN is incorrect, or the W-9 that the independent contractor provided was not signed. Previously, this amount paid to an independent contractor was entered in box 7 on the 1099-MISC.
The changes came about from legislation that was passed called The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). It changed the deadline for filing 1099-MISC from the end of February to the end of January and caused a lot of issues at the IRS. This opened the door to fraud so the 1099-NEC was brought back. By separating the non-employee compensation payments from the other funds that are reported on the 1099-MISC, it should make the process more streamlined.
To see more information, see the Instructions for Forms 1099-MISC and 1099-NEC. If you need help deciding what forms you need to file and to who, contact us for a free consultation.
