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Restaurants & Hospitality: Year-End Payroll Checklist (2026)
Year-end payroll for restaurants is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the restaurant items that decide which boxes are right: IRS Instructions for Form 8027 (2025), IRS About Form 8846 and IRS. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Restaurant items that shape the W-2 and 1099s
An employer that normally employed more than 10 employees on a typical business day in the preceding calendar year at a food or beverage operation where tipping is customary must file Form 8027 for each such establishment. If total reported tips for a payroll period are less than 8 percent of gross receipts, the shortfall must be allocated among directly tipped employees and shown in box 8 of Form W-2.
Food and beverage establishments use Form 8846 to claim a credit for the employer share of Social Security and Medicare taxes paid on certain employee tips; the credit is part of the general business credit.
Beginning with 2025 federal returns, employees and self-employed workers in qualified occupations may deduct qualified tips, defined as voluntary cash or charged tips including shared tips, up to $25,000 per year; the deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers).
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 restaurants the reconciliation that matters is that the pay codes for tip credit and tip pooling, high turnover and multiple pay rates 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.
- An employer that normally employed more than 10 employees on a typical business day in the preceding calendar year at a food or beverage operation where tipping is customary must file Form 8027 for each such establishment. If total reported tips for a payroll period are less than 8 percent of gross receipts, the shortfall must be allocated among directly tipped employees and shown in box 8 of Form W-2. [IRS Instructions for Form 8027 (2025)]
- Food and beverage establishments use Form 8846 to claim a credit for the employer share of Social Security and Medicare taxes paid on certain employee tips; the credit is part of the general business credit. [IRS About Form 8846]
- Beginning with 2025 federal returns, employees and self-employed workers in qualified occupations may deduct qualified tips, defined as voluntary cash or charged tips including shared tips, up to $25,000 per year; the deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers). [IRS: What the No Tax on Tips deduction means for you (March 5, 2026)]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the restaurant payroll library.
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Frequently Asked Questions
Year-end for restaurants: IRS Instructions for Form 8027 (2025)
An employer that normally employed more than 10 employees on a typical business day in the preceding calendar year at a food or beverage operation where tipping is customary must file Form 8027 for each such establishment. If total reported tips for a payroll period are less than 8 percent of gross receipts, the shortfall must be allocated among directly tipped employees and shown in box 8 of Form W-2.
Year-end for restaurants: IRS About Form 8846
Food and beverage establishments use Form 8846 to claim a credit for the employer share of Social Security and Medicare taxes paid on certain employee tips; the credit is part of the general business credit.
When are W-2s and 1099s due for a restaurant?
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 restaurant?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Tip credit and tip pooling, high turnover and multiple pay rates 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 Restaurants & Hospitality. 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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