How to process No Tax on Qualified Tips 2025–2028

The No Tax on Tips reduces Federal Income Taxes ONLY.  All other Federal and State taxes remain untouched as of 1/1/2026 for this process

Part of the OBBBA (One Big Beautiful Bill Act) passed late 2025 

Tax Year 2025 – Requirements and Changes

• Requires nothing for Sage 100 Software.
• No reporting requirements.
• Transition Penalty relief for Tax Year 2025, passed late in the year.
• Tax Year 2025 Interim Release Download (IRD) is available for installation.  “Excess golden parachute payment” affected Tax year 2025.
  • 1099-MISC Box 14 for Excess golden parachute payment is now blank.
  • 1099-NEC Box 3 now will populate for the Excess golden parachute payment.
  • 1099-DIV and 1099-INT No changes.
  • Only the current versions of Sage 100 listed below have been tested and confirmed compatible.

Tax Yea 2026 - Requirements

• MUST install Tax Year 2025 Interim Release Download (IRD) to process Tax Year 2026 1099 Misc or 1099 NEC correctly.
• IRD Compatible and Supported on Sage 100 versions:
  • 2025.0–2025.1 (7.40.0 – 7.40.1)
  • 2024.2–2024.3 (7.30.2 – 7.30.3)
  • 2023.5 (7.20.25)

For installations or upgrades, reach out to your Sage Partner or our Sage Expert Services team.  There’s also training available through Sage University if needed.  

• Migrate a copy of the company data to the newer version.
• Make sure all addresses, tax id’s, and required information is set up.  Company information is required in Library Master, Main, Company Maintenance.
• Process the 1099s in the newer version.  Retain the copy for historical purposes.

Tax Year 2026 – Changes in the Tax Year 2025 IRD

• 1099-Misc 2026 Tax Year changes
  • Box 13a added for Cash Tips
  • Box 13b added for Treasury tipped occupation code
  • Box 14 added for Overtime compensation
• 1099-NEC 2026 Tax Year changes
  • Box 1b added for Cash Tips
  • Box 1c added for Treasury tipped occupation code
  • Box 1d added for Overtime compensation
• 1099-Div and 1099 -INT No Changes

Tax Years 2026+ Setup for PAYROLL Tips

• Enter the TTOC (Taxable Tips Occupation Code) in Employee maintenance, Additional Tab, which will populate W-2 Box 14b.

• The list of codes is at U.S. Department of Treasury Tipped Occupation Codes.

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  NOTE: Box 7 (Social Security Tips) This box continues to report all tips subject to Social Security taxes, as in previous years. The amounts in Box 7 and Box 12 (code TP) may differ depending on the amount of qualified tips that meet the deduction criteria.

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  MUST use Earnings Code 000005 Tips Reported, Taxable Tips Earnings Type.

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  MUST use Earnings Code TE Tips Earned – Credit Card Tips, Taxable Tips Earnings Type.
  • Earnings Code MUST BE Taxable Tips Earnings type to display on existing reports.
  • Taxable Tips Earnings Type isn’t available for NEW earnings.

• Confirm earnings codes have the correct tax rules.  Note: most users won’t need to do anything to the earnings code’s tax rule.
  • If the company is an industry that’s eligible for No Tax on Tips, Total Amounts of qualified tips populate W-2 Box 12 Code TP for both Cash and Credit Card Tip Wages of the W-2.
    • DO NOT USE TAX RULE 800151 as it won’t calculate taxes.
    • Earnings code 00005, Reported Cash Tip Wages will use Tax Rule 800041 for Reported Tip Wages Code TP.
    • Earnings Code TE, Tips Earned Reported Credit Card Tip Wages will use Tax Rule 800133 for Reported Credit Card Tip Wages Code TP.  
  • For a business that doesn’t qualify for the tips tax deduction, Box 12 code will be TS.
    • The Earning codes will use Tax Rules 800145, for Cash Tip Wages and 800147 for Reported Credit Card Tip Wages.  
  • Buckets for W-2 Box 12 TP and TS will be populated in Tax Years 2026-2208 by adding up the earnings code amounts based on these tax rules.
  • NOTE: Mandatory Service charges aren’t considered tips (Qualifying or NOT).
  • Tax Code TS and Tax Rule 800149, is used for Mandatory Service Charge.

Tax Years 2026-2028 Setup for AP 1099s

• AP Options must have 1099 Reporting selected.
• Vendor Maintenance, another Tab must have information populated for one or more 1099 Forms.
• The 1099 History on the Additional Tab is populated when a payment check register is updated in the Accounts payable module.
• An Invoice is populated with the default 1099 information from the vendor.  Only one 1099 type is allowed per Invoice.  
• A Payment/Check can include multiple invoices so multiple 1099 types can be paid with one check. 
• The Payment or Check can have multiple lines with different 1099 types distributed to multiple gl accounts.
• If the Invoice was populated with an incorrect 1099 type or box, it can be changed when printing the check.
• ONLY the check updates the 1099 history for each Vendor on the Additional Tab (not the Invoice).