4 Tax Tips for Restaurant Owners
Updated: Aug 21, 2019
Personal taxes can be complicated. Business taxes for your restaurant can be even more difficult. If you own a restaurant, tax time can be challenging. The livelihood of your company is at least partially dependent on your ability to minimize your tax liability, while also meeting the requirements of the IRS.
While taxes are rarely an enjoyable or interesting topic, they’re a big part of any restaurant owner’s life. Getting a handle on your business taxes can increase your income and help you avoid costly legal issues. Here are a few quick tips for reducing your liability, while also helping you gain a better understanding of the most important concepts.
1. KEEP RECORDS
Keep your tax and financial documents for at least 7 years. If you’re ever audited, you’ll need those records. Any claims made at tax time require supporting documentation. Keeping good records is an excellent idea for any small business because it encourages organization. It is very difficult to reconstruct records at a later date.
2. KNOW YOUR AUDITS
There are several types of audits and some are more intimidating than others.
Office audit: Generally this is a simple audit. You’ll be requested to report to your local IRS office to resolve some discrepancy.
Correspondence audit: You’ll just be asked to send in a document via mail or fax.
Field audit: These tend to be very thorough audits and they are conducted at your place of business.
Criminal investigation audit: Consult your lawyer. You’re suspected of tax evasion.
3. PAY YOUR QUARTERLY TAX BILL
This is a common mistake. If you have an employer, your taxes are regularly taken out of your paycheck. If you’re self-employed, you’re required to estimate your tax each quarter and pay it. Failure to pay this can result in a significant tax penalty.
You might also end up with a bigger tax bill than you can handle in a single payment. Make a habit of setting aside a portion of your profit each month in anticipation of paying your quarterly taxes.
4. GET HELP
Depending on the complexity of your restaurant’s finances, hiring an expert to prepare your tax return might be a good idea. In theory, the money you spend ought to result in a smaller tax burden. It’s also helpful if any legal issues arise.
Taxes are a large expense for any business that shows a profit. It only makes sense to minimize that expense. Consult a tax professional if you have any questions or concerns regarding your business’s tax situation.
For more tax-saving tips, download our free workbook, "11 Tax-Saving Tips for Small Biz."