The audit. The two words that no restaurant owner wants to hear. The audit is not something that has to be inevitable. In fact, it can be easily prevented. Likely, your restaurant has someone who’s in charge of the books. If you run a smaller restaurant, this person might be you. If you have an accountant or not, there are still steps you should take as the restaurant owner to protect your business during tax season.
First, file on time. Failing to file regularly or file on time can create huge issues for your business ranging from penalty fees to legal charges. Taxes might mean another expense for your business in the short term, but in the long term not filing on time will result in an even larger expense.
Second, be aware of the specific tax forms for restaurants. Filing for a restaurant is a little more complicated than filing as a single head of household. Some forms that you need to complete as a restaurant owner (unless your accountant is filing for you) are: Employer’s Annual Federal Tax Return, W9, and Employer’s Annual Information Return of Tip Income and Allocated Tips. In addition to the basic forms, you should consider potential ways to lessen the cost and receive deductions.
For example, food and beverage costs are deductible. Recently purchased equipment may be deductible too. You can even deduct it for the year that it was purchased, or in smaller amounts over a few years. If your restaurant donates leftover food from the day to a local charity, you can likely deduct this as a charitable donation. However, make sure that you don’t make massive deductions or invalid deductions. As mentioned previously, audits are possible and it’s best to do everything in your power to avoid them.
Tax season can be overwhelming. We recommend finding someone that you trust to handle your restaurant’s accounting during tax season so that you can avoid the dreaded audit. Make sure that you report all of your income, file on time, make sure that your deductions are accurate, and take a deep breath - tax season is almost at a close!
