Restaurant Year-End Tax Preparation Services

What are the common mistakes in revenue reporting for restaurants?

The most common mistakes in revenue reporting for restaurants include:

• Overlooking discounts, promos, and comps while calculating
• Misreporting cash sales and reporting inaccurate income
• Inconsistent or incomplete daily sales reconciliations
• Omitting revenue from third-party delivery platforms
• Failing to properly account for tipped income

Can I deduct rent or lease payments for my restaurant space?

Yes, you can typically deduct rent or lease payments for your space during your restaurant year-end tax preparation. Confirm that the lease is in your business’s name, and be sure to keep records of all your lease payments.

If you own the property, however, only certain expenses like mortgage interest or property taxes can be deducted.

Is my restaurant eligible for the Work Opportunity Tax Credit?

Your restaurant may be eligible for the Work Opportunity Tax Credit (WOTC) if you hire employees from specific groups such as:

• Veterans
• Individuals receiving government assistance
• People with significant barriers to employment

You must certify these eligible employees through IRS Form 8850 and submit it to your state’s workforce agency.

What forms are required for reporting employee wages?

The forms typically required for reporting employee wages include:

• Form W-2 – Reports employee wages, tips, and other compensation to both the employee and the IRS
• Form 941 – Quarterly report for payroll taxes, including federal income tax withholding and Social Security/Medicare taxes
• Form 940 – Annual report for Federal Unemployment Tax (FUTA)
• Form W-3 – Summarizes all W-2 forms submitted to the IRS (used by employers filing multiple W-2s)
• State-specific forms – Depending on your state, you may need to file additional wage or unemployment tax reports
• Form 1099-NEC – If you employ contractors instead of regular employees, you’ll need to file this for non-employee compensation

How does leftover inventory at year-end affect taxes?

Leftover inventory impacts your cost-of-goods-sold (COGS), which directly affects your income—and your taxes. Your year-end inventory must be accurately valued at cost, market value, or the lower of the two. If you overstate or understate your inventory, you face potential penalties.

What is the FICA tip credit, and am I eligible?

The FICA tip credit is a tax credit that helps offset the Social Security and Medicare taxes you pay on your employees’ reported tips. And good news– if your employees receive tips, you’re very likely eligible!

To qualify, your staff must report their tips monthly (if they’ve received $20 or more). Furthermore, these tips must be directly tied to food and beverage service. You must also complete and submit Form 8846.

Specifically, the credit applies to taxes you pay on tips that exceed the federal minimum wage. Be sure to maintain good records of both your employee tip reports and your FICA tax payments.

This credit is easy to overlook, but it can save you thousands of dollars each year!

Do I need to account for refunds or customer returns?

Yes, you need to account for refunds or customer returns during your restaurant year-end tax preparation. Both of these reduce your total annual revenue, so you have to document them accurately. Otherwise, you’re reporting revenue that doesn’t reflect your actual sales.