Archives for January 2024

If you own or manage a restaurant, you know that payroll can be a complex and a time-consuming task. Comply with federal, state, and local laws and regulations, and ensure fair and accurate payment for your employees. In this blog post, we will provide some practices on how to navigate payroll in the restaurant industry.

Practices That You Can Follow

To make payroll and tip reporting easier and more efficient for your restaurant business, here are some best practices you can follow:

• use a payroll service or software that can handle the complexities of restaurant payroll, such as tip allocation, tip pooling, tip splitting, minimum wage adjustments, overtime calculations, tax withholding and reporting, etc.,
• educate your employees on their rights and responsibilities regarding tips, such as how to report them, how to share them with other employees, how to handle cash tips vs. credit card tips, etc.,
• establish a clear and consistent policy that outlines who is eligible to receive tips, how to divide them among different positions or shifts, and how to track and record them,
• keep accurate and complete records of your employees’ wages and tips, such as time cards, pay stubs, tip reports, tip receipts, etc.,
• review your payroll reports regularly to ensure that there are no errors or discrepancies in your employees’ wages and tips.,
• stay updated on the latest laws and regulations regarding payroll and tip reporting in your location, such as minimum wage rates, overtime rules, tip credits, etc.

Payment Schedule

In most restaurants, employees are paid every two weeks, either through a check or direct deposit. However, the frequency of payment can vary, and some restaurants may choose to pay their employees weekly or monthly.

Most restaurant employees are paid by the hour at the federal minimum wage. Therefore, it’s essential to accurately track each employee’s working hours to avoid any payroll management issues.

This payment schedule only covers the base wage. For employees who receive tips, such as waitstaff, they usually take their tips home in cash. This is a crucial detail to consider when setting up your restaurant’s payroll system.

Tips

In the restaurant industry, tips are a significant part of employees’ income, especially for roles like waitstaff and bartenders. But do tips count as payroll? The answer is yes, to some extent. If employees receive tips, these are considered taxable compensation. This means that as an employer, you have certain responsibilities related to these tips. They can lead to additional requirements for payroll withholding, reporting, and payment. Therefore, if your employees receive tips, it’s important to understand what counts as a tip and manage it appropriately in your payroll system. You can find more about this subject in our “Tips Reporting for Restaurants” blog and other blogs on our website.

Conclusion

Payroll in the restaurant industry can be challenging, but with proper planning, tools and guidance, you can manage it effectively and efficiently. Ensure correct and fair payment for your employees, comply with all tax and legal requirements, and optimize your tax savings by following the practices discussed in this blog post.

In the meantime, if you need tax and accounting services, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

 

In the world of business, efficiency is the key. One area where efficiency can make a significant difference is in accounting. QuickBooks and other  accounting software offer features that can automate many aspects of your accounting processes. This blog post will show some of the areas in which  you can automate your accounting.

Why Automate Your Accounting Processes?

You should automate you accounting processes, because the manual accounting processes can be time-consuming and can lead you to errors. Automation not only saves time but also increases accuracy, provides real-time data, and allows for better financial management. This being said, this doesn’t mean you can only rely on your software. The software can make mistakes if not set-up properly. That is why you should always reconcile your books and ensure that you have accurate financial statements. Before preparing your tax return, we recommend that each account on the Balance Sheet is reviewed and reconciled. And each account on your Profit & Loss statement is reviewed and corrected if necessary.

Automating Invoicing

One of the most tedious tasks in accounting is invoicing. Most accounting software have an option to automate invoicing. You can schedule your invoices, if your operation allows it, to be sent out at regular intervals. This can ensure timely billing without the need for manual intervention. For example, QuickBooks allows you to automate this process by setting up recurring invoices.

Automating Expense Tracking

Importing transactions using a bank feed is one of the most common features offered by accounting software. You should fully take advantage of this feature. For example, with QuickBooks, you can connect your bank account or credit card to automatically import and categorize transactions. This eliminates the need for manual data entry and makes expense tracking effortless, provided that you set up the bank rules properly and you review your books on a regular basis.

It takes accounting and tax knowledge to have accurate financial statements on a tax basis of accounting and can be difficult for a business owner to focus on this aspect. We offer monthly and quarterly services to include review and correction of your books, tax planning and tax savings strategies, tax filings and more that can save you time and provide peace of mind that you do not get in trouble with the IRS and that you take advantage of all the tax savings tools avilable to you.

Automating Reports

If your accounting software has the option to automatically generate and email you on a regular basis reports such as Balance Sheet and Profit & Loss statement, we recommend you set this up. This can help you and your accountant make more informed business decisions. It can also bring to light any tax traps that you might not be aware of otherwise, until tax time.

Automating Payroll

There are many payroll software companies that offer automated payroll services. Again, it is really important to have the initial payroll set up correctly and then every time you have a new employee to set up that employee correctly in the payroll module. You should still be aware of the regulations and the paperwork you need to have when you hire. Even with an automated payroll system, you should still reconcile your payroll tax returns, such as 941 or 940 forms, the state unemployment tax returns, W-3 and W-2 forms, etc. with your General Ledger to ensure accurate filings and financials.

Conclusion

Automating your accounting processes with your accounting software, not only saves you valuable time but also can provide accurate, up-to-date financial data, as long as the automation is done properly. Automation allows you to focus more on growing your business and spend less time on manual bookkeeping tasks, but we always recommend having a professional overseeing your accounting processes.

If you want to automate your accounting system and need help with keeping your financials accurate and audit proof, click here to find out more about our services.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you own or operate a restaurant, you may be eligible for a tax deduction that can help you save money on your equipment purchases. You have the option to expense the cost of property used in a trade or business in the year you start using it, instead of depreciating it over multiple years. This can reduce your taxable income in the year of purchase and increase your cash flow.

The types of property that qualify for the Section 179 expense election include tangible personal property, certain other tangible property (excluding buildings), single-purpose agricultural (livestock) or horticultural structures, storage facilities (excluding buildings), off-the-shelf computer software, and qualified real property.

What Is Qualifying Property?

Qualifying property for Section 179 includes tangible personal property that is used more than 50% of the time in your restaurant business. This may include:

• kitchen equipment, such as stoves, ovens, refrigerators, freezers, dishwashers, etc.,
• furniture and fixtures, such as tables, chairs, booths, counters, etc.,
• computers and software, such as point-of-sale systems, accounting software, etc.,
• security systems, such as cameras, alarms, locks, etc.

There are some limitations and exceptions to Section 179. In general, you cannot use section 179 expense election for the cost of land, buildings, or improvements to buildings, with some exceptions. Restaurants can definetely benefit from these exceptions. Check Publication 946 for when cost related to real property can be expensed using section 179 election. Additionally, there are a dollar limit and a business income limit that may reduce or eliminate your deduction. These limits apply to each taxpayer, not to each business.

What Is The Dollar Limit?

The dollar limit is the maximum amount you can deduct under Section 179 for the year. For tax year 2023, the dollar limit is $1,160,000. This means that you can deduct up to $1,160,000 of qualifying property that you placed in service in 2023. However, there is also an investment limit because the dollar limit is reduced by the amount of qualifying property that exceeds $2,890,000. This means that if you place more than $2,890,000 of qualifying property in service in 2023, your Section 179 deduction will be phased out.

For example, suppose you place $3,000,000 of qualifying property in service in 2023. Your dollar limit will be reduced by $110,000 ($3,000,000 – $2,890,000), resulting in a Section 179 deduction of $1,050,000 ($1,160,000 – $110,000).

What Is the Business Income Limit?

The business income limit is another restriction that may affect your Section 179 deduction. This limit requires that Section 179 deduction, after applying the dollar limit, cannot exceed the taxpayer’s business income. This means that you cannot use Section 179 to create or increase a net loss for tax purposes. This business income limit can have intricate calculations depending on your specific tax situation, but you can see more about these rules in Publication 946.

How Do I Claim Section 179?

To claim Section 179, you must complete part I of Form 4562, Depreciation and Amortization, and attach it to your tax return whether or not you file it timely.

What Are the Benefits of Section 179?

Section 179 can provide significant tax savings for restaurant owners who invest in new or used equipment for their business. By deducting the cost of qualifying property in the year of purchase, you can lower your taxable income and reduce your tax liability. This can also improve your cash flow and free up funds for other business expenses or investments.

Section 179 can also simplify your recordkeeping and tax reporting by eliminating the need to track depreciation for each property over several years. This can save you time and hassle when preparing your tax return. However, make sure you keep track of your assets for which you claimed Section 179 and their business usage, especially that there are some Section 179 recapture rules that you need to be aware of and you can find by clicking here.

Conclusion

Section 179 is a valuable tax deduction that can help restaurant owners save money on their equipment purchases. However, it is not a one-size-fits-all solution and may not be suitable for everyone. Section 179 may not always be the best option for every restaurant owner. Before electing Section 179, you should consult with a tax professional who can advise you on the best strategy for your specific situation.

That is why we are here, to help our business clients use the most tax efficient strategy. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you purchased or you are considering the acquisition of a qualified commercial vehicle, or if such a purchase is in your future plans, this article is for you. In case you own a business or a tax exempt organization and you are looking for a way to save money on your taxes, you may want to consider the qualified commercial vehicle credit, a tax credit of up to $40,000. A qualified commercial vehicle is a vehicle that meets certain criteria and is used for business purposes.

Amount Of The Credit

The credit is calculated as the lesser of:

• 15% of you basis (or 30% if the vehicle doesn’t run on gas or diesel),
• the incremental cost of the vehicle.

However, there’s a limit to how much credit you can get. If the vehicle’s gross weight is less than 14,000 pounds, the maximum credit is $7,500. For all other vehicles, the maximum credit is $40,000.

What Is A Qualified Commercial Vehicle?

A qualified commercial vehicle is a vehicle that:

• it is subject to depreciation allowance, with the exception of tax-exempt organizations and it is not subject to a lease,
• it is acquired for use in your trade or business, not for resale,
• it is primarily used in US,
• it must be manufactured by a company that is recognized as a qualified manufacturer according to IRC 30D(d)(1)(C),
• the vehicle should not have been previously allowed a credit under sections 30D (the new clean vehicle credit) or 45W (the commercial clean vehicle credit),
• it is considered a motor vehicle under title II of the Clean Air Act and is mainly used on public roads (excluding vehicles that only operate on rails),
• it is mobile machinery as defined in IRC 4053(8), including vehicles not designed to transport a load over a public highway,
• finally, the vehicle or machinery must be one of the following:
  • a plug-in electric vehicle that gets significant power from an electric motor with a battery capacity of at least:
    • 7 kilowatt hours if the gross vehicle weight rating (GVWR) is under 14,000 pounds,
    • 15 kilowatt hours if the GVWR is 14,000 pounds or more.
• a fuel cell motor vehicle that meets the requirements of IRC 30B(b)(3)(A) and (B).

For example qualified commercial vehicles include vans, pickups, SUVs and trucks.

How to Claim The Credit On Your Tax Return?

For businesses the credit is nonrefundable, which means that if the credit exceeds your tax liability, you can not get the excess amount as a refund. On the other hand, there is no limit on the number of credits your business can claim and you can carry over the credit as a general business credit.

To claim the credit, you need to file Form 8936-A, Qualified Commercial Clean Vehicle Credit, with your tax return. For each vehicle that qualifies for the credit, you should use a separate Schedule 1 (Form 8936-A) to determine the credit amount.

Meanwhile, you can find more information and instructions on the IRS website.

Depreciable Basis

When you set up your asset for depreciation, make sure that you reduce the vehicle depreciable basis by the amount of the commercial clean vehicle credit you receive.

Qualified Commercial Vehicle Credit VS Clean Vehicle Credit

These credits are both tax incentives offered by the IRS to promote the use of environmentally friendly vehicles. However, they have different requirements.

The Qualified Commercial Vehicle Credit is for businesses and tax-exempt organizations that purchase qualified commercial clean vehicles. On the other hand, the Clean Vehicle Credit is available to individuals and businesses that purchase new, qualified plug-in electric vehicles or fuel cell vehicles. To find out more about the Clean Vehicle Credit, you can read our article here.

We advise you to consult with a tax professional for more specific information about these credits and how they may apply to your situation.

Conclusion

In conclusion, purchasing a qualified commercial vehicle can be a smart move for your business and your taxes. You can save money on your tax bill by claiming a credit. If you are interested in buying a qualified commercial vehicle, make sure to consult with your tax professional and check the IRS website for the latest updates and requirements.

Taxes are complicated, especially if you have a business. If you need help with your business books, tax planning and filing your taxes, we are here to help. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you are earning money from a side job, a small business, or by selling items online, it is important to report your gross income correctly. If you make more than $600 in a year through payment apps or online marketplaces, you could receive a Form 1099-K. This form is typically sent to you and the IRS by January 31^st the following year.

Taxable and Nontaxable

Keep in mind that all income, regardless of the amount, is subject to tax unless the tax law specifically exempts it. This is applicable even if you don’t receive a Form 1099-K. You will need to report as income, the profit you make from your activities. The Form 1099-K shows the total amount of payments you received (gross income). You can use this form, along with other records, to calculate the actual taxes you owe on your profits.

What Should You Not Report on Form 1099-K

You should not report money received from friends or family as a gift on Form 1099-K. Similarly, reimbursements for personal expenses should also not be reported on this form. This includes shared costs for things like car rides or meals, money received for birthday or holiday gifts, or repayments for household bills from a roommate. These are not taxable income. It’s important to mark these payments as non-business in payment apps whenever possible.

Personal Items Sold

If you’ve received payments for personal items you’ve sold through a payment app or online marketplace, you might receive a Form 1099-K. Personal items can be anything you used personally, like a car, fridge, furniture, stereo, jewelry, or silverware.

The way you report these payments on your tax return depends on whether you made a profit or a loss from the sale. If you sold various personal items and some were at a loss and others at a gain, you should report them separately. You can see how to report the gain or losses from personal items sold here.

Avoid IRS Notices

You should total the amounts on all the 1099-k forms you received and check that the total gross income you report on your tax return is not less than your total 1099-K forms for that respective tax year, otherwise you are going to receive an IRS notice. There are two possible issues that could cause your gross income to be less than the total on your 1099-K forms:

• one or more 1099-K forms might be incorrect , in which case you should request a corrected form from the issuer,
• there are errors in your accounting of gross income, in which case you should review your bank reconciliations, you should make sure you do not report net amounts instead of gross amounts, check that you account for outstanding deposits and that you considered all the bank accounts in which you received payments.

Recordkeeping

Maintaining accurate records is important for tax filing. Remember to document all expenses, sales, and payments received for services throughout the year. You must separate business and personal transactions to be able to calculate your potential tax liabilities.

You can found more information about the Form 1099-K on the IRS website.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

What Are The 1099 Forms?

1099 forms are a type of information return that the IRS requires certain payers to file to report payments made to non-employees. There are different types of 1099 forms, depending on the nature of the payment. For example:

• 1099-NEC: reports nonemployee compensation of $600 or more, such as:
  • fees, commissions, prizes, awards, or other payments for services performed by independent contractors,
• 1099-MISC: reports miscellaneous income; if you’re running a business the most common situations in which you need to prepare 1099-MISC are when you made payments for:
  • royalties,
  • rents,
  • prizes and awards,
  • other income payments,
  • gross proceeds paid to an attorney.
• 1099-K: reports payment card and third-party network transactions, such as payments made through PayPal, Venmo, Stripe, or other online platforms,
• 1099-INT: reports interest income, such as interest paid by banks, credit unions, or other financial institutions,
• 1099-DIV: reports dividends and distributions, such as dividends paid by corporations or mutual funds; if you have a C Corporation business, most likely you will have to file this form,
• 1099-R: reports distributions from retirement plans, such as pensions, annuities, IRAs, or 401(k)s.

How To File The 1099 Forms Correctly?

If you are a payer who needs to file 1099 forms, you should follow these steps:

• determine which type of 1099 form you need to file based on the type of payment you made,
• obtain the payee’s name, address, and taxpayer identification number (TIN), such as Social Security number (SSN) or employer identification number (EIN); you should use Form W-9 to request this information from the payee,
• fill out the appropriate 1099 form with the required information,
• send a copy of the 1099 form to the payee by January 31 of the following year; you can send it by mail or electronically if the payee agrees to receive it electronically,
• send a copy of the 1099 form to the IRS by February 28 of the following year if filing by paper or by March 31 of the following year if filing electronically; you can use Form 1096 to summarize and transmit your paper forms to the IRS; you can use the IRS FIRE (Filing Information Returns Electronically) system or IRIS to file your forms electronically; in addition, 1099s can be filed via QuickBooks or different online vendors,
• keep a copy of the 1099 form(s) for your records.

Conclusions

You should be aware of the penalties for 1099 late filing, see here.

Filing 1099 forms can be a complex and time-consuming process. However, by following the rules and guidelines, you can ensure that you comply with the tax laws and avoid any penalties or audits.

If you need help with your business tax and accounting, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.