ACityDiscount's "Tax Guy" breaks down 2017 restaurant tax deductions
Uncle Sam Day... April’s tax filing deadline is approaching, so it’s time to start preparing for restaurant taxes. Actually, that’s not true. That’s a grave mistake. Restaurant taxes deserve as much attention as bi-weekly payroll. Yes, that much attention.
Your foodservice operation is #failing if restaurant taxes are not a priority. Failing like a busy burger joint short on wait staff. Don’t make the mistake of ignoring Uncle Sam until the spring. Too many restaurant owners and managers make that mistake, a recipe for financial disaster.
Here at ACityDiscount, our Tax Guy recommends foodservice operations prepare for federal, state and city restaurant taxes at least twice a year. After all, understanding which tax write-offs to employ is just as important as portion control. Check out these tips below about restaurant taxes and discuss them with a certified tax accountant. Also, check out the Restaurant Tax Center at IRS.gov.
Section 179 deductions
This tax deduction is perfect for restaurants preparing to make large capital investments. It makes it easier for smaller foodservice operations to buy up to $500,000 of qualifying equipment – from commercial kitchen equipment and computers to furniture. For more information on Section 179 deductions, visit section179.org.
Tax Guy says: "Section 179 is not the best tax decision for every foodservice operation… If your business has yet to enjoy serious profits, it may not be worth it. Wait until your business moves into a higher tax bracket or plans to purchase a substantial amount of equipment during a calendar year at ACityDiscount."
Food and beverage costs
Food and beverages account for more than one-third of all foodservice industry expenses. Because of this, it’s vital to understand tax write-off options, from the cost of raw ingredients to indirect costs such as cooking oil. Don’t forget any items that were wasted, spoiled or discarded.
Employee benefits
The cost of every meal provided to restaurant staff is tax deductible. So are fringe benefits such as paid sick leave, vacation pay and health expenses.
Mileage, mileage, mileage
On the road, keep track of the odometer. Other tax write offs: in-town/out-of-town deliveries, catering events and supply pick-ups.
Tax Guy says: "I suggest a simple-to-use app on your smartphone which tracks mileage."
Depreciation
Your restaurant taxes option: Deduct the cost of equipment for the year in which it was purchased, or deduct smaller amounts as the equipment depreciates over several years? Ask your certified tax professional which works best.
Additionally, existing businesses can apply to change accounting methods with Form 3115. This allows restaurants to account for harder-to-track items that depreciate – smallwares, glass and silverware. Property like furniture, beverage equipment and décor fall into the IRS category of Section 1245 property.
Worker tax credits
Employing “targeted groups” such as military veterans or disabled citizens? Your restaurant may be due a tax break. Check with your tax professional to learn more.
Charity donation
If you donate food to charity, the cost goes beyond ingredients - labor, storage and transportation add up, too. And of course, cash donations. However, the full cost of services (staffing, etc.) may not be deductible.
Energy-efficient restaurant equipment
In addition to saving up to $4,500 in energy costs annually, a commercial kitchen that uses ENERGY STAR® certified food service equipment may qualify for rebates and other tax deductions. Because these incentives are always changing, discuss this option with your local energy provider and visit ENERGYSTAR.gov to review current deductions.
Don't forget to contact a certified tax accountant before making any decisions that will affect your restaurant taxes.
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