It’s one of two things you absolutely can’t avoid in life, but federal and state tax filings can be a source of stress for restaurant owners beyond the average taxpayer. Calculating all potential deductions is a lot more complicated than when you file as an individual, and it’s critical to make sure you report everything accurately. Then you have to deal with the consequences and their impact on cash flow. We strongly recommend that every small business owner hire a professional accountant to manage their tax organization and filings, but we’ve included some quick tax tips for your restaurant to get you started giving tax preparers what they need to help you get the best results are in your quarterly filing.
Write off food and beverage expenses
For almost any restaurateur, this should be a no-brainer, as food and beverages can account for a third or more of your total expenses for managing your business. After all, they are a key component of the products you sell. But be careful, you’re deducting costs for everything possible. It’s not just the raw material cost of the dish (direct costs like meat and vegetables) that can be deducted. You can also consider indirect costs, such as oils and condiments, and food and beverages that are wasted, spoiled or otherwise discarded. Costs are written off when they are incurred, not when food is consumed.
Restaurants have a “safe harbor”
Proc of the Internal Revenue Service. 2015-56, 2015-49 I.R.B. 827 provides a safe harbor accounting method (“safe harbor”) for taxpayers who operate a retail establishment or restaurant business. The retail and F & B business treats 75% of the eligible costs paid for the refurbishment as “normal and essential” operating costs and capitalizes and depreciates the remaining 25% to refurbish or refurbish the location over time. You can deduct the cost of “repair”. As a cost to improve a qualified building over time. However, the scope of modifications or refurbishments must be greater than the new painting work or cleaning plan. These two items are considered deductible costs.
Don’t miss out on deducting employee benefits
You can deduct more than just employee wages. The cost of each meal you serve to the wait staff or kitchen staff is also Tax Deductions for Restaurants-deductible. As an employer, paid sick leave, vacation pay, and health (and any other form of) insurance are also expenses you can deduct. Be careful. As an owner, your own deductions are less clear-cut if you’re on a regular salary. The IRS does not include profits generated by restaurants and is paid to owners as tax write-offs in most cases.
Oh! and mileage
Are you driving for your business? Do any of your employees use driving as part of their work assignments? This deduction is one that needs to be tracked very carefully but is well worth the effort. Just get in the habit of noting down your miles when you deliver, go to a dining event, or pick up your order. It is highly recommended that you do this in a formal ledger or smartphone app designed for mileage tracking so that your accountant has everything ready for them when they need it.
Take advantage of the job opportunity tax credit
Some business owners may not even realize they are eligible for the deduction, the Work Opportunity Tax Credit (WOTC), which rewards employers for hiring individuals from certain target groups who have historically faced employment barriers and discrimination in the workplace. These may include former felons, unemployed veterans, recipients of food stamps or other public assistance, residents of empowered districts, individuals referred by vocational rehabilitation services, and more. It’s an easy way to earn extra credit on your federal return during the hiring process.
Count your charitable donations
Just like on individual Tax Deductions for Restaurants returns, business owners can deduct their contributions to organizations with 501(c)(3) status (with a few exceptions detailed by the IRS), whether it involves cash or hosted on their behalf Activity. However, be careful what you list as not everything you donate is actually deductible. The cost of food provided is of course deductible, but not staff time or the full-service charge to the public. Some enhanced deductions are specific to restaurants, though.
Section 179 deduction
Temporary until 2016, there is now a permanent tax deduction for equipment purchases by small businesses. New question for Section 179 of the Act? Certain large capital investments that previously could only be depreciated over a few years can now be deducted as a lump sum in the year of purchase. The break is designed to make it easier for small businesses to get cash flow to purchase eligible equipment — including computers, vehicles, furniture, and kitchen appliances — up to $500,000 in value.