Tax services for Restaurants

Preparing tax returns and IRS forms

Naturally, come tax time, we can prepare federal, state, multistate, and local returns — whether for your dining establishment or you (or both). But we also provide a broad array of other tax services for restaurants that can help you year-round with a variety of other filing requirements. Let us assist you with tasks such as processing Forms 1099 for any independent contractors you engage (such as construction or repair services, DJs, or musicians); filing Schedule K-1 if your restaurant is structured as a partnership, limited liability company or S corporation; submitting estimated tax payments, if necessary; complying with your federal and state payroll tax requirements; and understanding the tax implications of service charges vs. tips.

Planning long-term tax strategies all year round

When it comes to taxes, procrastination can be costly. Minimizing tax liability generally isn’t something you can do at the last minute when filing your tax return. To reduce taxable income, and successfully claim all the deductions and credits you’re entitled to, you’ve got to plan ahead. Of course, we recognize that tax planning for restaurants isn’t easy when you’re busy maintaining staffing levels, setting up and adjusting the schedule, managing inventory, and keeping the menu fresh. So don’t go it alone — we can work with you throughout the year to refine your recordkeeping and tax accounting so that you’re able to take advantage of every available tax break. In addition, just like popular menu items and restaurant design trends, tax rules, regulations and the law itself are constantly changing. Why worry? As professionals providing small business tax services, we stay on top of all the latest legislative developments and IRS guidance, as well as changes at the state and local levels, so you can stay focused on your customers, cuisine and competition. When tax-related risks or opportunities arise, you’ll be the first to know!

Assisting with a tax audit

Unfortunately, restaurants aren’t immune to tax audits — whether at the hands of the IRS or another taxing authority. We’ll do everything in our power to minimize your likelihood of being audited, but, if it comes to pass, we can guide you through the process and help minimize negative outcomes.

Properly allocating start-up expenses

Maybe you’re just starting your first restaurant or ready to launch a new one. If so, you may incur several types of “pre-opening expenses.” These expenses are incurred during the period before a new restaurant is up and running and earning revenue. Special federal income tax rules apply to different types of costs, and special tax return elections may be necessary to get the best treatment for your new place’s expenditures. Our tax services for restaurants include specialized advice for start-ups, so you can get the most favorable tax treatment.

Choosing or changing business structure

Whether launching a new restaurant or operating an existing one, your choice of business structure has serious tax implications. It may even lead you to suffer unexpected negative tax consequences. As part of our tax advice for restaurants, we can assist you in evaluating the pluses and minuses of sole proprietorships, partnerships, limited liability companies, S corporations, and C corporations, so you make the most advantageous choice. If a change is in order, we’ll be there to guide you through the process.

Welcoming new partners

Because some restaurants are structured as partnerships, a Section 754 election may be a tax-smart move when and if a new partner buys into the business. Under the Internal Revenue Code, a Section 754 election allows a partnership to adjust the basis (value) of the property within a partnership when a triggering event occurs. This often-complex strategy deals with the tax basis of a partner’s share of the business’s appreciated assets. As part of our wide-ranging tax advice for restaurants, we can determine whether such a move would be beneficial and, if so, assist you in making the election.

Properly handling tips

As you’re no doubt aware, tipping has tax implications for both you as an employer and your employees. We can help review your current processes to ensure staff are reporting all their tips to you in a timely fashion. We can also assist you in fulfilling your IRS withholding and reporting obligations.

Making lemonade out of lemons if you have a net operating loss

Many restaurants operate at a loss initially, and even some established ones can have a bad year. While a loss is never a good thing, under the Internal Revenue Code, qualifying businesses can carry forward net operating losses to future years to offset up to 80% of taxable income in those years, thereby reducing their overall tax liability. The rules are complex, but we can guide you through them.

Discovering tax breaks in the very walls around you

Do you own the real property on which your restaurant is located? If so, you could be sitting on a veritable deluxe salad bar of depreciation-related tax deductions. Generally, buildings used for business purposes, such as restaurants, have a 39-year depreciation period. But certain building components and land improvements can be depreciated much more quickly — potentially saving you tax dollars and boosting cash flow. So, why wait to benefit from these deductions? We can help you determine whether your property should undergo a cost segregation study, which combines accounting and engineering techniques to identify building costs that qualify for accelerated depreciation.

Preparing for your retirement, and helping employees with theirs

Many Americans intend to work longer into their lives. According to 2022 study by the Center for Retirement Research at Boston College entitled How to Think About Recent Trends in the Average Retirement Age, the average retirement age for American men is 64.7 and 62.1 for American women. Restaurant owners may choose to work well beyond that, given the benefits that wisdom and experience can bring to such a competitive industry. That means many restaurant owners have a great opportunity to grow a large nest egg over time. We can help you determine the best way to take advantage of available tax breaks to maximize this opportunity! Of course, your staff members also no doubt want to save for retirement in a tax-savvy manner. Sponsoring a qualified retirement plan can be a great way to improve employee retention in an industry that struggles with high turnover! We can advise you on the tax benefits associated with the various retirement plan options available to restaurants.

Managing buyout and succession planning issues

Addressing the issue of retirement also brings to mind the challenge of partner buyouts and succession planning. If you’re one of multiple owners of a restaurant, you may have to make payments to owners who retire or leave the business for other reasons (such as disability or death) to liquidate their ownership interests. A buy-sell agreement drafted by your lawyer can spell out how ownership interests will be transferred when an owner departs. The structure of the buyout can have major tax implications. We can advise on the tax consequences of various options so you can factor them into your structure choice. If you’re the sole owner of a restaurant, you’ll have other succession planning issues. Maybe you want to gift or sell ownership of your eatery to a child or other family member who’s ready to take over. Or you might choose to sell to another owner-operator, an investment group or a restaurant chain. Perhaps you want to execute a planned liquidation to help fund your retirement. There will be a tax impact to any route you take. Let us be your co-pilot.