Tax Planning Tips: These Top 10 Tasty Planning tips are geared toward the restaurant industry this month. Gavrilov & Co Accounting and Tax Service welcomes you to Part 3 of our series of blogs of these Top 10 Tasty Tax Planning Tips for your restaurant business. We have been honoring the niche of restaurant businesses this summer. This is because the food industry is so vital to the character of New York City. Likewise, we are eminently qualified to advise business owners in this niche.
Quick Review of Our Top 10 Tasty Tax Planning Tips for Restaurants, Parts I and II:
Thus we wanted to cover some of the basics of tax planning for all businesses, although we are showcasing the restaurant industry for July. Of our top 10 tax planning tips for restaurants, we have, in Parts 1 and 2, brought you details about:
Pass-Through Tax Treatment/Section 199A
- Depreciation & Section 179 Bonus Depreciation
- (The QIP Controversy: A Side-Dish)
- Tasty Tax Tip Number 3: Net Operating Losses
- Corporate Income Tax Rates
- Corporate Alternative Minimum Tax (AMT)–And the breakdown of complexities associated with AMT.
Top In the last 2 blogs, please note we have added bits of strategy, not just plain definitions. We have also explained that some of the tax planning behind a successful restaurant is complex, especially since the new tax regulations of the TCJA have come into play. Therefore, no restaurant owner should feel alone—we are here to help you create strategies for success.
A Special Note from Your Tax Planning Squad:
Remember just knowing about these tax regulations is not enough. We will help you know how to handle tax strategies and give you keys to tax-planning, year-to-year, month-to-month and day-to-day.
And we know that all you really want is to present the public with delicious food. That is why we are here to help you do the tax-planning. We “get” it. And now, Part III of our Top 10 Tasty tax tips:
7. Limits of Business Interest Deduction:
You need to know that the new laws limit business interest deduction for restaurant operations with revenue over $25M (in the aggregate).
- With good tax planning, you must prepare for the fact that the government now limits the amount of interest that can be “deducted
in a given year…”
- We want you to understand that the government will limit your business interest deduction to 30 percent of income before interest, depreciation and the new 20 percent deduction. Any excess is carried forward.”
Tax Planning Opportunities for Interest Expense Deductions include:
In the first place, you need to realize that the government’s limitation on deductibility is aimed at you if your average annual gross receipts over 3 years do not exceed $25 million.
Thus, let’s look at a scenario: You are utilizing debt to fund new restaurant openings. Now, you are feeling the financial crunch of start-up expenses. What can you do? You might choose to defer. That is you could defer the interest expense deduction as a result of lower taxable income. This example is sure to prove the value of your tax accountant in a tax-planning situation.
9. Do You Know about the Cruel Fate of Business Entertainment Expense?
Put simply, we can no longer deduct business entertainment expenses. And neither can the business clients who frequent your restaurant. This leads us to Number 9 of our Top 10 Tax Tips for your restaurant.
Therefore, we must prepare financially over the coming years. The reason: because restaurants might be losing a large chunk of the profit they previously got from business meeting clientele during business meals.
It does not take too much imagination to realize that losing this “deduction could adversely affect business spending on meals.” It’s a sort of a trickle-down effect because a restaurant’s business consumers are less likely to buy as many business meals since they are not deductible at any level. Be aware. Remember, in every tip of our Top 10 Tax Planning Tips for restaurants, comes an opportunity, not just an explanation of the regulation.
10. Excess Business Loss Limitation
The new excess business loss limitation bears study when planning your tax liability. And if your restaurant is in a brand new location,
this is especially important. (After all, it will take fans a while to find your new places.)
“This law limits the amount of loss that a taxpayer can use up to $250K in overall business losses ($500K, Married Filing Jointly).
Finding Opportunities Within the Business Loss Limitation:
However, with a little planning, you will note, we can carry forward the unused loss, to subsequent years. That’s a great example of tax planning.
11. HR Side Dish Note: Family Medical Leave:
It’s a little off the subject and not quite a top 10 item. But we had so many people check on this point that we are slipping it into this blog. Here’s good news for you if you are among those conscientious business owners who offer medical leave to employees. The government will give you, “12.5 percent tax credit based on the wages paid during leave for 2018 and 2019. This credit was intended to provide an incentive for employers who are not required to offer paid family leave…”
However, according to our research, this special credit is only going to last 2 years. Thus if you are a small employer, we’re not sure this benefit is worthy of the eventual cost.
Terrific (and Tasty) Take-Aways: Savor the Sweet Taste of Tax-Planning
Whether you own a restaurant business or another type of enterprise, the new tax laws will affect you. With tax planning accountants who create tax planning strategies, you can minimize the negative effects and maximize the positive. We invite you to work with us to discover how specialized tax planning strategies can affect your tax situation.
When you open your restaurant in the morning, ready to gear up for your lunch or dinner service, we want you to be confident. Confidence comes not only from your great recipes, but also from managing your growth and wealth. A big part of that management is optimizing your tax situation.
And our Top 10 Tasty Tax-Planning Tips, shared in the last 3 Gavrilov & Co blogs are just the tip of the iceberg lettuce. When we know the specifics of your restaurant business, we bring much more to the table.