10 Most Useful Tax Tips for Restaurants

Most startups and small businesses are familiar with tax filing time chaos: hurried organizing of transaction records, looking for loose ends such as missed payments or missing receipts for payments made, etc. For restaurants however, the financial loss incurred due to a last-minute rush can be significant, given the sheer volume of transactions. Startups and small businesses have tax obligations to fulfill; but they are also eligible for tax deductions and credits, based on the business type and eligibility criteria.

Helpful Tax Tips for Small Businesses and Restaurants

Restaurant related business owners are also liable to pay taxes to the IRS depending upon the type of business they run. Here are some useful tips that owners can utilize to benefit their businesses.

1. Track Depreciation and Utilize it

Depreciation can be claimed for business equipment, infrastructure, etc. Equipment that is purchased loses value over time. Restaurants must track the duration of the purchases so that the appropriate depreciation can be claimed. This is particularly useful for costly restaurant specialty gadgets and equipment such as special chillers, cookers, ovens, etc.

2. Track Tax Deductions

Tax deductions are tax savings applicable to restaurant owners, reducing the total taxable income reported on business returns. Before claiming a deduction, you should understand applicable tax-saving measures. For example, if the restaurant has earned $1000 in a particular period and claims a deduction of $200, the reported taxable income will be $1000 minus $200, or $800. Deductions are applicable on items such as food and beverages, costs incurred on property rentals, marketing and promotional expenses.

3. Insurance for Employees and Property Insurance

Restaurant owners can claim depreciation on insurance purchased for restaurant employees. It is also applicable to property insurance, and therefore it makes sense for restaurant business owners to invest in these measures.

4. Optimize on Business Tax Credits

Tax credits or tax breaks are applicable to business owners when individuals such as military veterans or disabled persons are hired to work. The tax credits may be as high as 40%of the first-year wages of the individual hired, depending on the applicable wage limit.

5. Track all Restaurant Transactions

This is particularly relevant to restaurant owners, given the high number of suppliers most restaurant businesses typically deal with: food and beverages, supplies such as napkins and silverware for diners, supplies such as grocery ingredients and kitchen equipment, etc. Tracking expenses and maintaining receipts is one of the best ways to ensure a hassle-free tax filing.

6. Recording Cost of Meals for Employees

Typically, when employees eat within the physical premises of a restaurant, the expense is a restaurant deduction. Business owners can either record employee meals as separate expenses when filing or include them within the cost of food.

7. Business-use Vehicle Mileage Deduction

Track the mileage of a personal vehicle that is used for business purposes. Expenses incurred on vehicles are also eligible for deductions. This means keeping track of repairs, servicing, and fuel costs. Take note that these options are not interchangeable: once you choose an option for tax saving purposes you cannot change it in the coming years. It makes sense to sit with a professional and determine which option would serve your business best.

8. Understanding Restaurant Tax Requirements

Restaurants, like other small businesses, are governed by state laws. Furthermore, these laws may be governed by regulations unique to the particular city in which the restaurant is located. Business owners need to acquaint themselves with local laws and track tax requirements accordingly.

9. Do Not Leave Things for the Last Minute

This rule is applicable to all business operations, but most importantly to tax filing time. Tracking records, maintaining receipts for all transactions, and investing in insurance is essential if a restaurant business is looking to reduce its tax liability. One option is installing automated tax processes that will track income, expenses, billing, invoicing, and employee information. This way, when tax season approaches there is no time wasted looking for physical receipts; the software records all the details instead.

10. Hire a Professional CPA for Your Restaurant Business Taxes

Businesses must remember that installing software on one of the business machines, or using digital tax workflow will not help the business on their own. However, hiring an accounting professional can prove to be extremely useful, especially for tax planning and savings for startups or small businesses looking to grow. Instead of investing in an in-house resource, it makes sense for businesses to reach out to professionals in partnerships or outsourcing arrangements where they can:

• Access professional expertise at reasonable rates.
• Optimize on tax savings, thus helping the business stick to its budget.
• Gain from fulfilling tax obligations as per regulations; while also gaining from experts’ wisdom on tax credits, tax breaks, and applicable tax deductions.
• Ensure the business benefits from relevant software and effective and optimal use of features, such as a digital tax workflow.

Analytix Solutions offers customized solutions for businesses that range from accounting and bookkeeping to more complex services, including accounting customized for the restaurant industry. Our restaurant portal is a tool tailored for restaurant businesses, helping owners access critical data in a timely and reliable manner. For more information on how we can assist your needs, call us at 781-503-9002 or email us at sales@analytix.com.

Written by

Analytix Editorial Team