Most restaurant employees receive tips as part of their pay. It can be challenging to account for tips from a payroll perspective. 

Employee tips totaling $20 or more in one month are subject to federal income and FICA taxes. Restaurant owners must gather information about these tips so you can include them on each employee's W-2 form.

We also help our clients determine whether they must offer medical benefits to their employees and which of their employees must have access to these benefits.

Accounting for these benefits can vary widely depending on the type and size of a small business. If our clients elect to offer retirement and medical benefits, our expert accountants can provide guidance for how to maintain accurate records for payroll and income tax purposes.

It is easy to overlook the tip credit when filing restaurant tax returns. Restaurant owners must pay taxes on the gratuities that their employees receive from customers. Restaurants typically pay federal minimum wage for tipped employees of $2.13 per hour, compared to $7.25 per hour for other employees. The federal tip credit helps to offset the employers FICA tax paid in excess of the standard federal minimum wage.

The owner can request the tip credit using IRS Form 8846. Owners who are eligible for the tip credit can save hundreds or thousands of dollars on their taxes each year. 

To qualify, the restaurant's employees must keep an accurate record of their daily tips, and the employer must keep an exact annual total. Our accountants can help restaurant owners keep accurate records of tips and assist with the calculation of the tip credit. 

Broadly, there are two accounting methods that small businesses can utilize. An accounting method determines the timing of reporting of income and expenses. The accrual method of accounting measures earnings more accurately than the cash method since it records income and expenses in the period to which they apply, instead of simply reflecting cash flow. This method of accounting is more complicated than the cash basis of accounting but it is required in certain circumstances. The cash basis of accounting is used by most small businesses and generally reports income when it is constructively received and expenses when they are paid.

Tax law is constantly changing, and it can be challenging to keep up! Restaurant owners do have some options for accelerating depreciation of capital improvements and other equipment purchases.

Understanding cash flow is critical for running a restaurant. Many restaurants are somewhat seasonal, especially those located in college towns or vacation destinations. Our accountants help clients navigate the volatility of seasonal income and the complications of running multiple locations. 

Restaurants must account for lost inventory from food spoiling and other challenges. Bars, brewpubs, and restaurants that serve alcohol should have controls in place to account for all the alcohol inventory. It is essential to prevent theft and deter employees from taking advantage of their employer. 

Meals and sales tax are unique to the food and restaurant industry. The meals tax rate varies by county. We often complete and remit the appropriate tax forms and payments for our restaurant clients to relieve this burden.