Minimize Your Tax Liability & Stay Under the IRS Radar
Don’t let the IRS stand for…… I RUN SCARED There is more to operating a restaurant besides cooking food What you don’t know can affect your business What you don’t know can affect you personally You have exposure with multiple government agencies Internal Revenue Service Georgia Department of Labor Georgia Department of Revenue May conduct various audits Income & expense audit Labor audit Officer compensation audit 1099-K audit May conduct various audits Labor audit for tips Labor audit for worker misclassification Labor audit for officer compensation Labor audit for employee benefits 5% of Employers get audited annually May conduct various audits Sales tax audit Payroll tax audit Tip reporting (Due February 28) 1099-K (Merchant Reporting) E-Verify (http://www.uscis.gov/e-verify) W-2 Reporting (Due February 28) 1099 Reporting (Due February 28) Payroll Reporting & Paying Taxes Tax Return Filings Employee’s must report tips to employer Tips are taxable for payroll taxes Tips must meet MINIMUM 8% of gross sales IRS can conduct tip audit and assign tip factor Must process new hires through E-Verify Hiring workers that are not processed through E-Verify may cause an IRS or labor audit http://www.uscis.gov/e-verify W-2’s and 1099’s are due to workers by January 31 Due to IRS and SSA by February 28 Due March 31 if filing electronically Late filing penalties assessed per W-2 and 1099 Issue a 1099-MISC to any individual paid $600 or more for the year Your employee’s are not independent contractors! Cleaning crew Food vendors Contractors and handy man Contract bookkeeper Hire a knowledgeable and reputable firm to handle payroll processing Payroll taxes need to be paid each pay period Payroll taxes penalties accrue daily! You are responsible for payroll taxes even if a third party processes your payroll 100% Trust Fund Penalty assessed against all responsible parties Liens will be issued against business Levy will be issued against bank and merchant accounts IRS can come after you personally! Business tax return due by March 15 annually With extension tax return due by September 15 S Corporations and Partnerships late filing penalties – ($195 per shareholder per month) How should you report your income and expenses? Cash or Accrual Basis Must select basis on the first year tax return filing Hire a licensed & reputable accountant or tax professional Ask questions to make sure it’s a good fit Make sure they have experience with restaurant accounting Not everyone is made equal Unlicensed (Unenrolled) tax preparers can only do taxes They can’t represent audits or collections cases Be sure to hire a licensed professional What type of entity should your restaurant operate as? Limited Liability Company S Corporation C Corporation Partnership Sole Proprietorship Not all entities provide the same tax benefits What kind of records should you maintain? How long should you keep records for? How should you keep your records? Which accounting software should you use? QuickBooks Desktop QuickBooks Online Xero The IRS can request a copy of your file during an audit Keep books with a good Chart of Accounts Develop chart of accounts that work for your restaurant Sub accounts and detailed reports are important Good chart of accounts provides accurate information Provides accurate food and labor cost Must keep food cost between 27-30% Must keep labor cost under 30% S Corporations must pay officer compensation to shareholders/owners Don’t take all your profits as distributions Lack of officer compensation is a recipe for an audit! Gifts to employee’s $25 max per employee Bonuses to employee’s Must be paid through payroll What is deductible? Cell phones Automobiles Mileage – standard deduction Home office rent Meals & Entertainment for business meetings Tip Credit Best of luck with in your restaurant endeavor For additional information contact Andrew G. Poulos (770) 938-6300 www.savvytaxguy.com www.savemefromirs.com
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