We’ve previously shared The 5 Must Deduct Items for Your Business and thought we would expand by sharing tips for tax returns for restaurant owners. Despite the many expenses that can come with working in the food industry, restaurant owners are eligible to take advantage of a number of tax strategies. These deductions can help them save big while staying stay compliant with tax authorities. Read on to find out more.
1. State Taxes
Not all state taxes are created equal and chances are even if you live in a lowly regulated state (like my home state of Texas), you still have to deal with their taxes. The most common form is the payment of sales tax on your tax return. You may even have to contend with city and county taxes. This task can be made all the more difficult if you own two or more restaurant locations. Each location in which you own a restaurant may require a separate sales tax collection and filing. This is why it is crucial to keep track of all of this financial information in order to properly report and submit all sales taxes to their respective agencies.
2. Compensation and Restaurant Tax Returns
Your employees are receiving compensation and benefits, and there are some deductions to this pay that you can take advantage of. Any compensation in any form that you pay out must by law be provided for your employees’ work. If the IRS or state agency chooses to review your tax and payroll information and believes that you are overpaying employees based on other compensation reported on other restaurant tax returns within your area, these payments may not be fully deductible. Those who fill out their tax returns properly will be fine if the government decides to further review your return.
3. Apply for The Work Opportunity Tax Credit (WOTC)
Does your restaurant hire people who are part of a targeted group? This includes military veterans and the disabled. If so, you may qualify for a tax break on as part of your tax return for restaurant owners. When eligible, the WOTC can be deducted for up to 40% of the first year pay for each respective eligible employee, which can be up to $6,000. To learn more about the Work Opportunity Tax Credit, you can visit the IRS page here to get more information and download the appropriate forms.
4. More Deductions on Tax Returns for Restaurant Owners
As a restaurant owner, you are allowed to take a number of deductions on your business just like many other small business owners. These include but are not limited to:
- Cost of food – raw ingredients, canned food items, oil, sugar, spices, etc.
- Beverages – sodas, bottled water, beer, wine, liquor, juice, etc.
- Eatery – plates, silverware, napkins, bowls, cups, table cloths, etc.
- Appliances – refrigerators, freezers, walk-ins, reach-in coolers, ovens, microwaves, toasters, blenders, deep fryers, stoves, dishwashers, pots, pans, etc.
- Employee pay – wages, insurance, retirement accounts, sick leave, vacation pay, and bonuses for all full time and part time employees. You may even deduct the cost of contract workers such as repairmen, maintenance, and even bookkeepers.
- Property costs – rent, mortgage, property taxes, or anything incurred to maintain the location or locations of your restaurant, including the corporate office.
- Dining room furniture – tables, chairs, stools, cash registers, lighting fixtures, signage, window displays, decor, menus, the hostess stand, office supplies, etc.
- Depreciation – on property, equipment, vehicles, etc.
- Insurance – including property, liability insurance, healthcare, and others used to protect your physical restaurant location, employees, and customers.
- Marketing and ad expenses – coupons, flyers, your website, Google AdWords, social media ads, radio and television ads, and other paid advertising used to promote the restaurant.
Tax Returns for Restaurant Owners in Houston
If you are a restaurant owner in Houston and need help preparing your tax return or in bookkeeping, contact us.