Which jobs count as tipped occupations?

The IRS final regulations list roughly 70 occupations — from servers and bartenders to stylists, valets, and delivery drivers — each with its own occupation code that now goes on the W-2. We map your roles to the list as part of the check-up.

Do mandatory service charges count as tips?

No. Only voluntary tips qualify. If your business adds automatic service charges or large-party fees, how you classify them now directly affects what your team can deduct.

We haven't set anything up and it's mid-2026. Are we in trouble?

No — but the sooner your system starts capturing the data, the cleaner your W-2s. 2025 had penalty relief for reporting; for 2026 the codes are expected on the W-2, so mid-year setup is exactly the right move.

What is the FICA tip credit?

A federal credit that gives restaurants back part of the employer payroll taxes paid on reported tips. It's been around for years, it's routinely missed, and reviewing it is part of every WAYG payroll check-up for hospitality clients.

We're not a restaurant — does this still apply?

If anyone on your team earns qualifying tips or works FLSA overtime, yes. The overtime deduction alone touches construction, healthcare, logistics, and manufacturing crews.

Payroll readiness · Restaurants, salons, service employers

No tax on tips is here. Is your payroll ready to prove it?

Your team's tips and overtime can now be federally deductible for them — up to $25,000 in tips and $12,500 in overtime per person — but only if your 2026 W-2s carry the new codes. The data has to be captured all year. For restaurants, salons, and service businesses, this is a now problem, not a January problem.

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This matters to you if…

Your team earns tips — the IRS list covers roughly 70 tipped occupations (servers, bartenders, stylists, drivers, and more).
Your crew works real overtime — construction, kitchens, logistics, healthcare.
You run payroll through any provider and haven't heard the words "Box 12 codes TP and TT" yet.
You're a restaurant — there's a second win here (the FICA tip credit) that many restaurants leave unclaimed every single year.

Your W-2s become the proof

Starting with tax year 2026, the W-2 carries new codes for qualified tips (TP), qualified overtime (TT), and the employee's tipped-occupation code. Your employees' new deductions live or die by whether your payroll captured that data correctly — all year. 2025 had transition relief. 2026 does not. The employers who set this up now give their teams a real raise at tax time and have zero January scramble. Be that employer.

How WAYG helps

STEP 1

Payroll audit

We check how your tips and overtime are tracked today and what your payroll provider needs to capture for the new codes.

STEP 2

Setup, done right

We work with your payroll system (or your provider) so the right data flows into the right boxes automatically.

STEP 3

Year-end proof

Clean W-2s your team can actually use, plus a FICA tip credit review for restaurants — that one often puts real money back in the business itself.

Common questions

Reviewed by the WAYG tax team · Updated July 2026

Which jobs count as tipped occupations?: The IRS final regulations list roughly 70 occupations — from servers and bartenders to stylists, valets, and delivery drivers — each with its own occupation code that now goes on the W-2. We map your roles to the list as part of the check-up.
Do mandatory service charges count as tips?: No. Only voluntary tips qualify. If your business adds automatic service charges or large-party fees, how you classify them now directly affects what your team can deduct.
We haven't set anything up and it's mid-2026. Are we in trouble?: No — but the sooner your system starts capturing the data, the cleaner your W-2s. 2025 had penalty relief for reporting; for 2026 the codes are expected on the W-2, so mid-year setup is exactly the right move.
What is the FICA tip credit?: A federal credit that gives restaurants back part of the employer payroll taxes paid on reported tips. It's been around for years, it's routinely missed, and reviewing it is part of every WAYG payroll check-up for hospitality clients.
We're not a restaurant — does this still apply?: If anyone on your team earns qualifying tips or works FLSA overtime, yes. The overtime deduction alone touches construction, healthcare, logistics, and manufacturing crews.

Give your team the W-2 that works for them.

Book a payroll check-up

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