Grippin Donlan Pinkham

– 2025 YEAR-END INFORMATION REPORTING MEMO –

DEADLINE REMINDERS

*Deadline postponements due to natural disasters are not considered in the due dates above but could affect your due dates based on your specific situation and location.

**If you provide us your tax information after these dates your tax return will be extended. We will adhere to this policy to ensure the well-being of our staff and the quality of our services. Tax return engagement letters and document requests will be provided to you in December 2025.

NEW DEDUCTION FOR CERTAIN TIPS AND OVERTIME

Beginning in 2025, taxpayers may be eligible for a new deduction on their personal tax return for certain qualifying tip and overtime pay. The 2025 Form W-2 will not include fields for reporting this information. However, employers may choose to provide these details to employees in a separate format to assist them in determining their allowable deduction.

We recommend working with your payroll provider now to ensure these items are tracked properly for payments made in 2026, as the 2026 Form W-2 will require reporting of these amounts. Many factors will need to be evaluated to determine qualifying tips and overtime. Additional information can be found in Notice 2025-69 here at the IRS website.

Employees who wish to have this deduction reflected in their future withholding should submit a new Form W-4 once the 2026 version becomes available on the IRS website.

NEW 100% EXPENSING AND INCREASED SECTION 179 LIMITS FOR QUALIFYING FIXED ASSETS

The new law permanently retains the 100% bonus depreciation election for fixed assets placed in service after January 19, 2025. In addition, the Section 179 deduction limit has been increased to $2.5 million, with a phase-out threshold beginning at $4 million in equipment purchases. The increased Section 179 limits apply to property placed in service in tax years beginning in 2025. These provisions may help reduce your overall tax burden if you plan to invest in qualifying assets before year-end. Please contact us if you would like to discuss this in more detail.

HEALTH INSURANCE FOR S-CORPORATION SHAREHOLDERS

Health insurance premiums and contributions to health savings accounts paid by an S Corporation for more than 2% shareholders must be included as wages on Form W-2 in boxes 1 and 16. These amounts are not subject to federal or state tax withholdings and Medicare and Social Security tax should not be withheld on these amounts. When appropriately reported on the W-2, the shareholder may be able to deduct these costs on their individual tax return

FORM 1099 GENERAL REPORTING INFORMATION

Forms 1099 are used to report certain amounts paid by a trade or business and rentals, including payments for rents and payments for services to independent contractors & consultants.

Payments over $600 for services paid to a non-corporate entity are reported on Form 1099-NEC.

Payments over $600 for rent paid to a non-corporate entity are reported on Form 1099-MISC.

Note that starting in 2026 the threshold will be increasing from $600 to $2,000. This applies to 2026 payments that will be reported on 1099s prepared in January 2027.

Payments to vendors paid by credit card or through third-party processors (such as PayPal and Venmo) are not required to be reported on 1099s.

Rental real estate activities need to file 1099s if the rental is considered a trade or business.

Also send a copy of the 1099 to the state if either 1) the payment was subject to state withholding or 2) the payment was made to a non-resident for services performed in the state.

THRESHOLDS FOR ELECTRONIC FILING OF FORMS W-2 AND 1099

The IRS requires electronic filing if you file 10 or more information returns. This is no longer determined on a form by form basis, instead you must look at the combined number of forms filed to determine if you must file electronically. The IRS encourages using their free filing system called IRIS, but the FIRE system is also still available through tax year 2026. Learn more about the filing threshold and the IRIS system here. Vermont requires electronic filing if total combined W-2s and 1099s being submitted exceed 25. The online filing system can be accessed at The Vermont Dept of Taxes.

VT W-2 REPORTING OF EMPLOYER-SPONSORED HEALTH COVERAGE

The VT Dept. of Taxes has mandated that all employers must include the cost of employer-sponsored healthcare on the employee Form W-2. Employers must report both the portion paid by the employer and the portion paid by the employee as a single line item in Box 12 on Form W-2 with code “DD”. This reporting is informational only with no tax implications.

NORTH CAROLINA PERSONAL PROPERTY TAX RETURNS

Personal Property Tax Returns are due January 31, 2026. A return is required when a NC business owns or possesses personal property including machinery and equipment, office furniture, computers, supplies and leasehold improvements. If you would like us to prepare the return, please provide us with information by January 10, 2026. If you have questions, please contact our NC office at 704-558-6010.

PERSONAL USE OF COMPANY VEHICLES

The personal use of a company owned vehicle is a taxable fringe benefit and must be reported on the employee’s Form W-2. For assistance in calculating these amounts, please contact us.

WITHHOLDING REQUIREMENTS ON BONUSES

Bonuses and other supplemental payments to employees are wages and taxes must be withheld by the employer. Income tax may be withheld at a flat rate or at the employee’s normal rate if paid concurrently with regular wages. The 2025 flat rates are 22% federal, 6.6% Vermont and 4.25% for North Carolina. These payments are also subject to Social Security and Medicare withholdings. See section 7 of Publication 15 for more details.

GROUP TERM LIFE INSURANCE

Employer-provided group term life insurance coverage over $50,000 must be treated as taxable income and reported on the employee’s Form W-2. The taxable value is determined by using a table provided by the IRS. For assistance in calculating the value, please contact us.

OTHER REMINDERS

- Have employees review their pay stubs to confirm that their name, address, social security number and related information is accurate.

- Review your state payroll filing requirements. Generally, states require that taxes be withheld based on where the employee is performing services. If you have employees who have shifted to remote working from home and they live in a different state, a change may be needed to their state withholdings.

- The current version of Form W-4 can be found at the IRS website. New employees and all change requests must be made on the current Form W-4. IRS withholdings tables can be found in IRS Pub 15-T. State withholding information can be found on the websites for the Vermont Department of Taxes and North Carolina Department of Revenue.

- All participants in cafeteria plans must be employees. An “employee” for purposes of the cafeteria plan rules does not include a partner in a partnership, a member in an LLC, or a 2% or greater shareholder of an S-corporation (or their family members).

- Vermont landlords who rent one or more residential units must submit a Form LRC-140 to Vermont for each property by January 31, 2026. If you have five or more tenants, you must file electronically. Please note that the 2025 form has been updated and requires new information. Copies of the Landlord Certificates are no longer provided to the tenants. Find more information and file online at the Vermont Department of Taxes.

- All Vermont employees must complete a Form HC-2, Declaration of Health Care Coverage every year. This form is not submitted to the VT Dept. of Taxes but must be retained in your business records for three years. Find more information here.

- Vermont employers with 5 or more employees that do not offer a retirement plan are required to participate in the Vermont Saves program. Find more information here.

- Vermont Child Care Contributions (CCC) are required to be paid by Vermont employers. Find more information here.

- Operators of short-term rentals in Vermont must collect a 3% surcharge and remit on Form MRT-441. Find more information here.

- Employers with over 50 full time employee equivalents may have Affordable Care Act reporting requirements and could be subject to penalties if health insurance requirements are not met. Find more information here.

- If your business has inventory, we will need the cost of inventory on hand at 12/31/25.

- In order to claim any vehicle business deductions, a written mileage log must be maintained. Please document the odometer readings at 12/31/25 for all company vehicles and personal vehicles with business use. For each vehicle, we will need the total miles driven during the year and the total business miles driven during the year.