You know that filing taxes can be stressful even in the best of times, but as a restaurant owner, tax time can leave you in total chaos because your deductions are exponentially more complex. Despite the numerous expenses that come with the territory in the food industry, restaurant owners are eligible to take full advantage of a number of tax-saving strategies and deductions to help them save money and stay compliant with tax authorities.
Here are a few quick restaurant tax tips for filing returns that can help save you some headaches and money.
1. 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 hassle-free tax filing.
2. Recording Cost of Meals for Employees
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.
3. Advertising Expenses
You may have been doing a lot more advertising to drive business, and you can deduct those advertising expenses, which include social media advertising and promotions. Entertainment expenses aren’t generally deductible, but you can deduct the cost of entertainment sold to customers. For example, if you have a band playing while people are dining, you can deduct this cost. You can also deduct the cost of meals and entertainment at a local promotional event for your restaurant.
4. Leasing or Buying a Car for Business Use
Did you buy a delivery vehicle for your restaurant? If you lease or buy a car to use for your business, you can deduct loan interest or lease payments. You can only deduct these expenses for the percentage of the expense representing your business use of the car. If you buy a car for business, you can depreciate the cost. You must use the car more than 50% of the time for business to depreciate the car.
5. 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.
6. Employee Pay and Benefits
Employee pay and benefits are a big portion of your costs as a restaurant owner. Fortunately, you can deduct:
Employee pay, including bonuses, commissions, sick pay, and vacation pay
Employee benefits, like health plans and life insurance coverage
7. Make Use of Enhanced Charitable Deductions
With a handful of exceptions, the IRS allows businesses to deduct donations to non-profit organizations just like individuals do, including some enhanced deductions specifically for restaurants donating food, gift cards, and other items to charities.
8. 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 are essential if a restaurant business is looking to reduce its tax liability. One option is installing automated tax processes that 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.
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