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Who We Serve · Restaurant Owners

Tax and finance for restaurants that run on thin margins and tips.

A restaurant carries a dense set of tax mechanics: the FICA tip credit, tip allocation, new no-tax-on-tips reporting, build-out depreciation and a payroll that runs every week. We handle tax, payroll and CFO work as one engagement, so the numbers you manage by are the numbers you file.

Schedule a Strategy Session Where the leverage is
  • Independent full-service restaurants
  • Multi-unit operators
  • Bars and taverns
  • Franchisees
  • Cafés, bakeries and caterers
  • $5.15Hourly wage floor for the FICA tip credit at food and beverage employers — the federal minimum as of 1/1/20071
  • $25,000Annual cap on an employee’s qualified-tips deduction for 2025–2028, phased down above $150,000 of MAGI2
  • 8%Share of gross receipts below which a large food or beverage establishment must allocate tips3
  • $2.56M2026 §179 expensing limit, usable for qualified improvement property; phase-out begins at $4.09M4

Figures verified October 23, 2026 · sources at the end of this page

The financial shape of the business

Small margins, large payroll, constant reporting.

Three features of the restaurant model drive most of our work.

  1. 01

    Tips run through your payroll

    Charged tips flow from the POS into payroll, and every dollar touches FICA, the §45B credit, Form 8027 and, starting with 2026 Forms W-2, separate tip and occupation-code reporting. Errors repeat every pay period, so we fix the process before we touch the return.

  2. 02

    Build-outs absorb the capital

    Kitchens, bars, dining rooms and remodels are where restaurant capital goes. Whether a dollar is 39-year building cost, 15-year qualified improvement property or §179 property decides whether you deduct it this year or over decades.

  3. 03

    Cash is tight and timing matters

    Sales tax collected, tips owed to staff, payroll deposits and vendor terms all sit in the same bank account. A weekly cash view, not a year-end return, is what keeps a location funded.

Tax Advisory

The provisions that move a restaurant’s tax bill.

Current through October 2026, including changes made by P.L. 119-21 (enacted July 4, 2025) and the IRS guidance that followed.

  • FICA tip credit (§45B)Food and beverage employers get a general business credit for employer social security and Medicare tax paid on tips, except tips needed to bring cash wages up to $5.15 an hour. In the IRS’s Form 8846 example, a server paid $375 for 100 hours who received $450 in tips generates credit on $310 of those tips. The credit reduces your payroll-tax deduction dollar for dollar, and you can claim it, or elect out, within 3 years of the return due date, including on an amended return.1,5
  • Tips, service charges and the 8% ruleAn automatic gratuity, such as an 18% charge added to large-party checks, is a service charge rather than a tip: it is regular wages, it isn’t reported as tips on Form 8027, and it isn’t a qualified tip for the new employee deduction. Large food or beverage establishments must allocate tips when reported tips fall below 8% of gross receipts, or a lower rate the IRS grants on petition, which can’t go below 2%. The voluntary agreements listed in the 2026 Form 8027 instructions are TRDA and TRAC/EmTRAC (plus GITCA for gaming); the Service Industry Tip Compliance Agreement proposed in Notice 2023-13 is not among them.6,3,7
  • No tax on tips: what the employer reportsFor 2025 through 2028, employees in Treasury-listed occupations may deduct up to $25,000 of qualified cash tips, reduced by $100 for each $1,000 of modified AGI above $150,000 ($300,000 joint). The final regulations (T.D. 10044) list bartenders, wait staff, chefs and cooks, dishwashers, host staff and bakers among food-service occupations, and tips received through tip-sharing count. Tips remain wages for withholding and FICA; the employer’s job is reporting, with 2026 Forms W-2 showing reported tips in box 12, code TP, and up to two Treasury Tipped Occupation Codes in box 14b.2,6,8
  • No tax on overtime: box 12, code TTEmployees may deduct up to $12,500 ($25,000 joint) of qualified overtime for 2025–2028, but only the premium portion of overtime the FLSA requires, such as the “half” in time-and-a-half. Overtime paid under a policy richer than the FLSA doesn’t qualify. Employers report the qualifying amount in box 12, code TT, so payroll has to separate the premium from the base rate.2,8,9
  • Staff meals stay deductible after 2025For amounts paid or incurred after December 31, 2025, §274(o) disallows deductions for employer eating facilities and convenience-of-the-employer meals. P.L. 119-21 excepted expenses described in §274(e)(8), food and beverages sold to customers, and the regulations already apply that exception to a restaurant’s shift meals for its own staff, at 100%. Meals for a separate office or commissary team need their own analysis.10,2,11
  • Remodels: QIP, bonus and §179Interior improvements to a nonresidential building, made after the building was first placed in service, are qualified improvement property: 15-year property eligible for 100% bonus depreciation when acquired after January 19, 2025. A written binding contract signed before that date fixes the earlier acquisition date, and enlargements, elevators, escalators and internal structural framework are excluded. Roofs, HVAC, fire protection and security systems aren’t QIP, but §179 reaches them; the 2026 limit is $2,560,000, phasing out above $4,090,000 of qualifying purchases.12,2,13,14,4
  • Franchise fees and royaltiesAn initial franchise fee is a §197 intangible amortized over 15 years, and a renewal is treated as a new acquisition. Royalties contingent on sales and paid at least annually in substantially equal or fixed-formula installments are deducted currently under §1253(d)(1) and stay outside §197. We separate the two at signing so the fee isn’t expensed and the royalties aren’t capitalized.15,16
  • Employee Retention Credit cleanupP.L. 119-21 bars any credit or refund under §3134, the ERC for the third quarter of 2021 (and the fourth quarter for recovery startup businesses), after July 4, 2025 unless the claim was filed by January 31, 2024. It also gives the IRS six years to assess those credits and extends the §6676 erroneous-claim penalty to employment-tax refund claims. If a promoter prepared your claim, we assemble the eligibility support and handle the IRS response.2,17

CFO Advisory

Metrics we put in front of operators.

Built from your POS, payroll and ledger so management reporting ties to the books.

MetricWhat it tells youCadence
Prime costFood, beverage and labor cost as a share of sales — the two largest lines you can move week to week.Weekly · Per location
Theoretical vs. actual food costThe gap between what recipes say plates should cost and what inventory says they did. It isolates waste, portioning and shrink.Weekly · Per menu category
Sales per labor hourTies scheduling to demand. Paired with overtime hours, it shows where FLSA premium pay is building before payroll closes.Weekly · Per shift
Reported tip rateReported tips as a percentage of gross receipts by location and payroll period. It shows allocation exposure under the 8% rule and the base for the §45B credit before year-end.Per payroll period
Four-wall EBITDALocation-level profit before corporate overhead. It decides which units get capital and which get fixed or closed.Monthly · Per location
Delivery-channel contributionThird-party platform revenue after commissions, promotions and packaging. Off-premises volume isn’t automatically margin.Monthly · Per platform
Weeks of cashCash on hand, net of sales tax collected and tips owed to staff, divided by average weekly outflow. It is the earliest warning of a funding gap.Weekly
Covers and average checkSeparates traffic from pricing when sales move. Menu-price changes show up here before they show up in margin.Weekly · Per daypart

Accounting & Compliance

What we file, and what we coordinate.

We run federal tip and payroll compliance in-house and work alongside the specialists you already use.

Handled by our team

  • Tip payroll — tip-credit wages, employee tip reports, and 2026 W-2 code TP and box 14b occupation codes
  • Form 8027 — the 10-employee test across all operations, 8% allocation and IRIS filing for each location
  • Form 8846 — monthly creditable-tip math and amended-return lookbacks
  • Overtime reporting — separating the FLSA premium for W-2 code TT
  • Forms 1099-NEC and 1099-MISC — the $2,000 threshold for 2026 payments to bands, contract labor and vendors
  • POS and delivery-platform reconciliation — card batches, platform payouts and Form 1099-K tie-outs
  • Fixed-asset schedules — QIP, bonus and §179 elections tracked by location

Coordinated with your specialists

  • Sales and meals tax — we plan around it and coordinate filings with a provider such as Avalara or TaxJar
  • Reviewed or audited statements for lenders or franchisors — we build the books and schedules; your audit firm issues the report
  • Wage-and-hour, tip-pool and state tip-credit rules — coordinated with your employment counsel
  • Cost segregation on building purchases — coordinated with an engineering-based study provider

What changed · What’s next

Dates on the restaurant calendar.

Law changes and filing deadlines that matter for 2026 and 2027.

  1. P.L. 119-21 enacted

    Created the qualified tips and overtime deductions for 2025–2028, cut off late ERC claims, and restored the Form 1099-K threshold for third-party network transactions to more than $20,000 and more than 200 transactions. That threshold doesn’t apply to payment-card settlements, which stay reportable at any amount.2,18

  2. Meal rule and $2,000 Form 1099 threshold take effect

    §274(o) applies to amounts paid or incurred after December 31, 2025, with the exception that keeps restaurant shift meals deductible. Forms 1099-NEC and 1099-MISC now start at $2,000 for payments made after December 31, 2025, with inflation adjustments after 2026.10,19

  3. Final tipped-occupation regulations effective

    T.D. 10044 finalized the list of tipped occupations and the definition of qualified tips, including the rule that automatic gratuities and other mandatory charges aren’t qualified tips.6


  4. Ahead

    2026 Forms W-2 due with tip and overtime fields

    The first filing season with box 12 codes TP and TT and box 14b occupation codes. The due date is February 1 because January 31, 2027 falls on a Sunday.8


  5. Ahead

    2026 Form 8027 due

    Paper returns are due March 1, 2027 and electronic returns March 31, 2027, filed only through IRIS now that the FIRE system is retired. Each location files its own return, but the 10-employee test is applied across all of your food or beverage operations.3


  6. Ahead

    Tips and overtime deductions sunset

    Neither §224 nor §225 allows a deduction for tax years beginning after December 31, 2028, so 2028 is the last year employees can claim them unless Congress extends them.2

The Beaconshire Method

How an engagement runs.

Four phases, one accountable team. Tax, CFO and accounting work move together, so a decision made in one discipline is already reflected in the other two.

  1. Phase 01

    Discovery

    We map how tips, service charges and payroll move from your POS to the ledger, pull three years of returns and Forms 941 and 8027, and look for unclaimed §45B credit and open ERC exposure.

  2. Phase 02

    Strategy

    We set entity and owner-compensation structure, a depreciation plan for each build-out, and a tip-reporting design that holds up under the 2026 W-2 rules.

  3. Phase 03

    Implementation

    We rebuild the chart of accounts by location, configure payroll for codes TP and TT and occupation codes, amend returns where credit was left behind, and stand up weekly flash reporting.

  4. Phase 04

    Stewardship

    Monthly close, quarterly estimates and tip-rate monitoring, year-end Forms W-2, 8027 and 1099, and representation if the IRS asks about tips or ERC.

Run the numbers first

CalculatorBreak-Even & Target ProfitBreak-even revenue and units, revenue for a profit target, margin of safety and operating leverage. CalculatorProfit Margin, Markup & PricingPrice from cost and target margin, net out card fees and variable costs, and see what a discount really costs. Calculator13-Week Cash Flow & RunwayWeek-by-week closing cash with payroll, estimated-tax dates and one-off items — the low point and runway.

Where this work lives

Payroll

Owner and staff payroll, payroll-tax filings, multi-state withholding and classification risk.

Explore payroll →

Tax Advisory & Planning

Year-round planning, entity design and multi-year projections — scoped so the savings justify the fee.

Explore advisory →

Bookkeeping

Tax-ready books and cleanup — the foundation every strategy and forecast depends on.

Explore bookkeeping →

FAQ

Common questions.

Does no tax on tips mean we stop withholding on tips?

No. The deduction is claimed on the employee’s own return. Tips remain subject to income tax withholding and to employer and employee social security and Medicare tax, and you still report them. What changed is the reporting: 2026 Forms W-2 show reported tips in box 12, code TP, with the occupation code in box 14b.

Are automatic gratuities on large parties tips?

No. A charge you add to the check is a service charge. It is paid as regular wages, isn’t reported as tips on Form 8027, doesn’t generate the §45B credit and isn’t a qualified tip for the employee deduction. When guests choose the amount, including zero, the payment can be a tip, so your point-of-sale screens matter.

We never claimed the FICA tip credit. Can we go back?

Often, yes. The Form 8846 instructions allow you to claim the credit, or elect not to, within 3 years of the return’s due date on an original or amended return. Partnerships and S corporations pass the credit to owners, so an amended entity return usually means amended owner returns too. We quantify the credit month by month before recommending amendments.

Can we still deduct staff meals in 2026?

Yes, for your restaurant staff. The §274(o) disallowance that began in 2026 doesn’t apply to expenses described in §274(e)(8), and Treas. Reg. §1.274-12(c)(2)(v) applies that exception to meals a restaurant provides its own employees from the food it sells to customers. Meals for a separate office or commissary staff are reviewed on their own facts.

Should we expense our remodel?

It depends on what was built and on your income this year and next. Interior work is usually qualified improvement property, eligible for 100% bonus or §179; roofs and HVAC can use §179; the building shell is 39-year property. Expensing everything in a low-income year can waste the deduction, so we model several years, federal and state, before making elections.

We filed an ERC claim in 2024. What happens now?

If the claim is under §3134 (generally the third quarter of 2021) and was filed after January 31, 2024, P.L. 119-21 bars the IRS from allowing or paying it after July 4, 2025. Credits under §3134 that were paid stay open to assessment for six years from the later of the return or the claim. We review the eligibility file, quantify exposure and represent you if the IRS reaches out.

Other industries we serve

Sources

  1. [1]26 U.S.C. §45B — Credit for portion of employer social security taxes paid with respect to employee cash tips — Legal Information Institute (Cornell Law School)
  2. [2]Public Law 119-21 (One Big Beautiful Bill Act), 139 Stat. 72 — §§70201, 70202, 70301, 70305, 70432, 70433, 70605 — Congress.gov
  3. [3]Instructions for Form 8027 (2026) — Employer’s Annual Information Return of Tip Income and Allocated Tips — IRS
  4. [4]Rev. Proc. 2025-32 — 2026 inflation-adjusted items — IRS
  5. [5]Form 8846 (2025) and instructions — Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips — IRS
  6. [6]T.D. 10044 — Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips (Internal Revenue Bulletin 2026-18) — IRS
  7. [7]IR-2023-19 — IRS introduces new service industry tip reporting program (Notice 2023-13, proposed SITCA) — IRS
  8. [8]2026 General Instructions for Forms W-2 and W-3 — IRS
  9. [9]FS-2026-13 — Questions and answers about the deduction for qualified overtime compensation (August 2026) — IRS
  10. [10]26 U.S.C. §274 — Disallowance of certain entertainment, etc., expenses — Legal Information Institute (Cornell Law School)
  11. [11]26 CFR §1.274-12 — Limitation on deductions for certain food or beverage expenses — eCFR
  12. [12]26 U.S.C. §168 — Accelerated cost recovery system — Legal Information Institute (Cornell Law School)
  13. [13]Notice 2026-11 — Interim guidance on the additional first year depreciation deduction under §168(k) — IRS
  14. [14]26 U.S.C. §179 — Election to expense certain depreciable business assets — Legal Information Institute (Cornell Law School)
  15. [15]26 U.S.C. §197 — Amortization of goodwill and certain other intangibles — Legal Information Institute (Cornell Law School)
  16. [16]26 U.S.C. §1253 — Transfers of franchises, trademarks, and trade names — Legal Information Institute (Cornell Law School)
  17. [17]26 U.S.C. §3134 — Employee retention credit for employers subject to closure due to COVID-19 — Legal Information Institute (Cornell Law School)
  18. [18]26 U.S.C. §6050W — Returns relating to payments made in settlement of payment card and third party network transactions — Legal Information Institute (Cornell Law School)
  19. [19]Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026) — IRS

Figures and deadlines verified October 23, 2026

Start with a tip and margin review.

We review your last filed return, your payroll tip setup and one month of POS data, then tell you what we would change and what it is worth. Every project is scoped so the potential tax savings and financial clarity justify the cost of our fees — and if we don’t believe the math works in your favor, we’ll tell you before you engage.

Schedule Your Free Strategy Session