Running a restaurant is a challenging and rewarding business, but it can also be complicated when it comes to accounting. Restaurant owners need to comply with a variety of tax and regulatory requirements, and mistakes can be costly. That’s why it’s important to work with an experienced accounting firm that specializes in restaurant accounting services. In this post, we’ll take a closer look at some of the challenges that restaurants face and how accounting services can help.
Restaurant Accounting Services: Understanding Sales and Use Tax
Sales and use tax are a crucial part of restaurant accounting. For restaurants, this means collecting and remitting sales tax on food and beverage sales, as well as paying use tax on purchases of equipment and supplies that you weren’t charged sales tax on.
However, there are some special considerations that make sales and use tax more challenging for restaurants. For example, many states have complex rules around the taxation of prepared food, which can vary depending on factors like whether the food is consumed on-premises or to-go, whether it’s hot or cold, and whether it’s sold as part of a combo meal. Additionally, restaurants may be subject to local sales and use tax requirements, which can vary from one jurisdiction to another.
Employee Classification Challenges
Another major challenge for restaurants is employee classification. In general, employees can be classified as either hourly or salaried, and as either exempt or non-exempt from overtime pay requirements. However, the rules around employee classification are complex, and restaurants face some unique challenges.
For example, many restaurant workers are paid a combination of wages and tips, which can complicate their classification. Additionally, restaurants may have employees who perform both tipped and non-tipped work, which can make it difficult to determine their proper classification.
Tips Reporting Requirements
Tips are an important part of the restaurant industry, but they can also be a source of confusion when it comes to accounting. The IRS requires restaurants to report all tips received by their employees, and failure to do so can result in penalties.
However, the rules around tip reporting can be complex, particularly when it comes to reporting tips for employees who receive both wages and tips. Additionally, restaurants may need to report tips to multiple agencies, depending on their location. You should also be aware of the tip credit.
Affordable Care Act Requirements
The Affordable Care Act (ACA) imposes a number of requirements on employers with more than 50 full-time equivalent employees, including restaurants. For example, the ACA requires employers to provide health insurance to full-time employees or pay a penalty. Additionally, the ACA requires employers to report certain information to the IRS and to their employees.
However, the rules around the ACA can be complex, particularly for small businesses. Restaurants may also face additional challenges, such as high turnover rates and the use of part-time employees, when calculating their full-time equivalents.
Wage and Hours Laws
Restaurants are also subject to a variety of wage and hour laws, which can be complex and difficult to navigate. For example, the Fair Labor Standards Act (FLSA) requires employers to pay their employees at least the minimum wage, as well as overtime pay for hours worked over 40 in a week. Additionally, some states and localities have their own wage and hour laws that may be more stringent than federal requirements. Check out Minnesota’s overtime laws here.
For restaurants, there are some unique challenges when it comes to wage and hour laws. For example, restaurants may have employees who work split shifts, which can complicate their pay calculations. Additionally, restaurants may need to comply with tip pooling and tip credit rules, which can affect how much they pay their employees.
Opportunities for Tax Savings
Despite the many challenges that restaurants face when it comes to accounting, there are also some opportunities for tax savings. Here are a few examples:
- Work Opportunity Tax Credits: This credit can provide a tax benefit for employers who hire employees from certain targeted groups, such as veterans or people with disabilities.
- Section 179 Depreciation: This provision allows businesses to deduct the full cost of certain assets, such as equipment or furniture, in the year they are purchased.
- Tip Credit: Restaurants can reduce their business income tax by their employer portion of FICA paid on certain tip income.
Working with Haworth & Company, Ltd.
If you’re a restaurant owner in Minnesota, Haworth & Company, Ltd. can help you with all of your accounting needs. Our team of experienced professionals specializes in restaurant accounting, and we can provide a wide range of services to help you stay compliant, save money, and grow your business, including accounting, tax, payroll, and consulting. We understand the unique challenges that restaurants face, and we’re committed to providing personalized, high-quality service to each of our clients. Contact us today to learn more about how we can help your restaurant succeed.
