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Fitness Studios & Gyms: Year-End Payroll Checklist (2026)
Year-end payroll for fitness businesses is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the fitness business items that decide which boxes are right: IRS Tip recordkeeping and reporting, Treasury and IRS final regulations. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Fitness business items that shape the W-2 and 1099s
Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share.
Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness.
The qualified tips deduction for tax years 2025 through 2028 is capped at $25,000 per return and phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). Employers must separately report cash tips on Form W-2 box 12 code TP and include the Treasury Tipped Occupation Code in box 14b.
The January calendar
W-2s and W-3 to the SSA and copies to employees by January 31; 1099-NEC for each contractor paid $2,000 or more in the year, the threshold for tax years after 2025, by the same date; Form 940 and the fourth-quarter 941 by January 31 as well, with a 10-day extension where all deposits were on time. Ten or more information returns of any kind, counted together, must be filed electronically. For fitness businesses the reconciliation that matters is that the pay codes for trainer 1099 vs W-2 classification, commission-based training pay and class-based instructor pay landed in the right W-2 boxes for every employee.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share. [IRS Tip recordkeeping and reporting]
- Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness. [Treasury and IRS final regulations, Occupations That Customarily and Regularly Received Tips (91 FR, April 13, 2026)]
- The qualified tips deduction for tax years 2025 through 2028 is capped at $25,000 per return and phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). Employers must separately report cash tips on Form W-2 box 12 code TP and include the Treasury Tipped Occupation Code in box 14b. [IRS Tip recordkeeping and reporting]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the fitness business payroll library.
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Frequently Asked Questions
Year-end for fitness businesses: IRS Tip recordkeeping and reporting
Employees must report cash tips to the employer in a written statement by the 10th day of the following month unless total tips from that employer are under $20 for the month. The employer must withhold income tax and the employee share of Social Security and Medicare tax on reported tips and pay the employer share.
Year-end for fitness businesses: Treasury and IRS final regulations, Occupations That Customarily and Regularly Received Tips (91 FR, April 13, 2026)
Treasury and IRS final regulations published April 13, 2026 list Exercise Trainers and Group Fitness Instructors as Treasury Tipped Occupation Code 608, an occupation that customarily and regularly received tips, for purposes of the qualified tips deduction. The category covers instructing or coaching groups or individuals in exercise activities for the primary purpose of personal fitness.
When are W-2s and 1099s due for a fitness business?
January 31 for both, to the recipient and to the SSA or IRS. The 1099-NEC threshold is $2,000 for tax years after 2025, and 10 or more information returns of any type must be e-filed.
What does managed payroll cost for a fitness business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Trainer 1099 vs W-2 classification, commission-based training pay and class-based instructor pay are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Fitness Studios & Gyms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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