Free Payroll Tool
Never miss a payroll tax deadline
Every 2026 federal and state payroll tax deadline on one filterable page.
View the Payroll Tax Calendar →Blog · Payroll Management · Franchise
Franchise Operations: Year-End Payroll Checklist (2026)
Year-end payroll for franchises is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the franchise items that decide which boxes are right: IRS FICA Tip Credit for employers. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Franchise items that shape the W-2 and 1099s
Food and beverage employers can claim a general business credit on Form 8846 equal to the 7.65% employer share of Social Security and Medicare taxes paid on employee tips, excluding tips used to bring wages up to the $7.25 per hour federal minimum wage. Distributed service charges are wages, not tips, and are excluded from the credit.
The Work Opportunity Tax Credit equals 40% of up to $6,000 of first year wages, a maximum of $2,400 per certified hire from a targeted group who works at least 400 hours, and Form 8850 must be submitted to the state workforce agency within 28 days of the start date. As of the IRS page reviewed July 20, 2026, the credit applies to individuals who begin work on or before December 31, 2025.
An employer that operates a large food or beverage establishment, meaning on-premises dining where tipping is customary and more than 10 employees on a typical business day in the prior year, must file Form 8027 for each establishment. If reported tips are under 8 percent of gross receipts, the employer must allocate the difference to tipped employees and show it in Form W-2 box 8.
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 franchises the reconciliation that matters is that the pay codes for joint employer liability, multi-entity payroll and franchisor reporting requirements 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.
- Food and beverage employers can claim a general business credit on Form 8846 equal to the 7.65% employer share of Social Security and Medicare taxes paid on employee tips, excluding tips used to bring wages up to the $7.25 per hour federal minimum wage. Distributed service charges are wages, not tips, and are excluded from the credit. [IRS FICA Tip Credit for employers]
- The Work Opportunity Tax Credit equals 40% of up to $6,000 of first year wages, a maximum of $2,400 per certified hire from a targeted group who works at least 400 hours, and Form 8850 must be submitted to the state workforce agency within 28 days of the start date. As of the IRS page reviewed July 20, 2026, the credit applies to individuals who begin work on or before December 31, 2025. [IRS Work Opportunity Tax Credit]
- An employer that operates a large food or beverage establishment, meaning on-premises dining where tipping is customary and more than 10 employees on a typical business day in the prior year, must file Form 8027 for each establishment. If reported tips are under 8 percent of gross receipts, the employer must allocate the difference to tipped employees and show it in Form W-2 box 8. [IRS Tip recordkeeping and reporting]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the franchise payroll library.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
Year-end for franchises: IRS FICA Tip Credit for employers
Food and beverage employers can claim a general business credit on Form 8846 equal to the 7.65% employer share of Social Security and Medicare taxes paid on employee tips, excluding tips used to bring wages up to the $7.25 per hour federal minimum wage. Distributed service charges are wages, not tips, and are excluded from the credit.
Year-end for franchises: IRS Work Opportunity Tax Credit
The Work Opportunity Tax Credit equals 40% of up to $6,000 of first year wages, a maximum of $2,400 per certified hire from a targeted group who works at least 400 hours, and Form 8850 must be submitted to the state workforce agency within 28 days of the start date. As of the IRS page reviewed July 20, 2026, the credit applies to individuals who begin work on or before December 31, 2025.
When are W-2s and 1099s due for a franchise?
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 franchise?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Joint employer liability, multi-entity payroll and franchisor reporting requirements 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 Franchise Operations. 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
From the blog