Next month doesn’t just bring April showers; it also brings tax time. And while operators might think their annual taxes are already complicated, the fact is there are many things they don’t realize they need to keep on top of and a number of things that are easy for them to overlook.
Stacy L. Gilbert, CPA, a partner at Citrin Cooperman in the firm’s Springfield, New Jersey, office, concentrates on restaurants. She provides tips for restaurant owners and operators to ensure they file their taxes correctly and don’t miss out on any rebates for which they are eligible.
Following her advice can also help operators avoid any unpleasant surprises if they are audited.
- Make sure to use the correct rate to calculate the FICA Tip Credit for the company’s business tax return. Many accountants or business owners incorrectly use $7.25 as the minimum wage to use for this calculation, but it should be $5.15. Operators could be losing hundreds or thousands of dollars by using the wrong amount.
- Make sure to pay use tax on any food or beverages that are given away. Depending on the state operators do business in, food and drink is taxable unless they are selling it, in which case their customer pays the tax. But if they are giving complimentary beverages or using the products in promotional events, operators must pay the tax. Their POS system should be designed to capture these items appropriately.
- Ensure that employees are correctly reporting their tips. Use the IRS worksheet with form 8027 (Employer’s Annual Information Return of Tip Income)to verify that the tips employees are reporting correlates with the credit card payments on file. This will help determine whether employees are reporting all of their tips. “Unreported tip income can lead to additional employer liability for FICA taxes, so it is in your best interest to educate your employees to properly report their tips,” Gilbert says.
- If between February 3, 2010, and January 1, 2011, an employee was hired who had not been employed for 40 hours a week for the 60 days prior to the hire and was retained for at least a year, the operator is eligible for a tax credit. This amount is either $1,000 or 6.2 percent of the wages paid to the retained worker, whichever is the lesser amount. Because a year had to elapse before this credit went into effect, many restaurant operators may have forgotten about it, Gilbert says. This falls under the 2010 Hiring Incentives to Restore Employment Act.
- Do not count the sale of gift cards as income until they are redeemed. This is considered Deferred Income for some restaurants. However, after the last day of the second tax year following the year of sale, operators need to report the income from any gifts cards—even unredeemed ones—as taxable income. “The IRS is looking to this more as an area to audit,” Gilbert warns.
- Double check that the correct social security numbers are being used for employees. These can be verified at www.ssa.gov/employer/ssnv.htm.
Using a 52- to 53-week tax year rather than a calendar year is an option for restaurant operators and can make life easier because certain things—like inventory or payroll—typically take place on the same day every week or month, Gilbert says.
By Amanda Baltazar