Restaurants & Bars
Tax and accounting for restaurants and bars. We calculate the FICA tip credit most owners have never claimed, handle payroll for tipped employees correctly, and keep daily books that show whether thin margins are real.
The Industry
A restaurant does $40,000 in sales on a good week. Food costs run around $12,000. Labor is $14,000 including all those tipped hours. Rent, utilities, insurance, and supplies take another $8,000. That leaves $6,000 before the owner pays themselves or covers the tax bill. Except the owner isn’t sure those numbers are right because the books are three weeks behind, inventory counts happen when someone remembers, and tip reporting is a mess. The place is busy. Whether it’s actually profitable is a different question.
Restaurants and bars run on daily cash flow and thin margins. Money comes in through the POS, tips split a dozen different ways, inventory turns over before it spoils or it becomes waste. Payroll happens every week or two with tipped minimum wage calculations that most payroll software handles poorly. Sales tax accrues with every transaction and files monthly. The owner is working 60 hours on the floor and handling books at midnight. Something always falls through the cracks.
Who This Covers
Who This Covers
Full-service restaurants, bars and taverns, quick-service and fast casual, breweries with taprooms, coffee shops, caterers. Any food and beverage operation dealing with tipped employees, inventory, and daily sales that need to reconcile.
What Makes It Complex
What Makes It Complex
Tipped employee payroll with minimum wage rules and FICA obligations. Daily cash handling and POS reconciliation. Inventory and cost of goods that directly affect margin. Sales tax on every transaction. Build-out costs when you open or renovate. High employee turnover creating constant onboarding. All of it happening in a business that runs on single-digit net margins where small misses compound fast.
What We Handle
The FICA tip credit is one of the most valuable and most overlooked tax provisions for restaurants. Under current law, employers can claim a federal tax credit for the employer-paid FICA taxes on tips that exceed the federal minimum wage. If you have tipped employees earning $15 or $20 an hour in tips, the credit adds up fast. The catch is that it requires accurate tip reporting. If tips aren’t tracked and reported correctly, the credit can’t be claimed. Most restaurant owners have never had anyone run the math for them.
Claiming the credit starts with having the books in order. We handle the bookkeeping that reconciles daily sales from your POS to the bank, tracks tip income by employee, and keeps cost of goods and inventory current. Payroll runs on schedule with tipped wages calculated correctly and FICA handled right. Sales tax files on time so you’re not chasing penalties. The tax return then captures the tip credit along with depreciation on your build-out and equipment under current rules.
FICA Tip Credit and Tax Planning
FICA Tip Credit and Tax Planning
We calculate the credit based on your actual tip reporting. For many restaurants, this returns thousands annually. Some larger operations see tens of thousands depending on staff size and tip volume. The credit is tied to tip amounts above minimum wage, so accurate tracking is not optional. We make sure the documentation is there and the credit is claimed properly on your return.
Daily Books and Compliance
Daily Books and Compliance
POS reconciliation to the bank so daily sales are verified. Tip reporting that supports both compliance and the credit. Cost of goods tracked by period so you know actual food and beverage cost. Sales tax filed on schedule. Build-out and improvement depreciation under current rules, including qualified improvement property if your space qualifies. All of it running in the background so you can focus on the restaurant.
Common Problems
Restaurant owners leave money on the table because nobody told them the credit existed or because their tip reporting wasn’t clean enough to support it. The FICA tip credit has been in the tax code for years, but most preparers don’t calculate it unless the client asks. And the client doesn’t ask because they’ve never heard of it. Meanwhile, the owner pays FICA on every dollar of reported tips and gets nothing back. This is what it looks like when you have a tax preparer but no tax advisor.
The other problem is not knowing what the restaurant actually makes. Food cost is a guess because inventory counts are sporadic. Daily sales reconciliation doesn’t happen so cash variances go unnoticed. The POS says one thing, the bank shows another, and nobody investigates the difference. You think you’re making money because the place is busy, but you can’t point to the number. That’s not a reporting problem. That’s a bookkeeping problem that compounds into a planning problem.
Credits Nobody Mentioned
Credits Nobody Mentioned
The FICA tip credit is the most common example, but there are others. Build-out depreciation that wasn’t calculated correctly. Deductions for spoilage and waste that were never tracked. The owner’s retirement contributions when they’re not maxing out available plans. These things don’t show up on a return unless someone looks for them before the year closes.
Margins You Can't See
Margins You Can't See
Revenue minus expenses should tell you what you made. But if cost of goods isn’t tracked by period, if inventory isn’t counted, if daily sales aren’t reconciled, the numbers are fuzzy. You know you worked hard. You’re not sure it paid off. And when it comes time to make a decision about menu prices or staffing, you’re guessing instead of deciding.
What Changes
The tip credit gets calculated and claimed. Build-out and equipment depreciation runs on the correct schedule under current law. Payroll handles tipped wages correctly so there’s no compliance exposure and the reporting supports every credit you’re entitled to. Quarterly projections show where you’ll land so the tax bill doesn’t surprise you in April. You stop leaving money with the IRS that could have stayed in the business.
Daily sales reconcile. You know what the restaurant actually brought in, not just what the POS summary says. Food cost shows as a real percentage by period, so you know when it’s drifting before it becomes a problem. Inventory is a number, not a feeling. The books close monthly, and you can see what’s working and what isn’t. When a decision comes up, you have numbers to decide with instead of hope.
Tax Credits and Deductions Captured
Tax Credits and Deductions Captured
FICA tip credit calculated and claimed every year it applies. Depreciation on build-out and equipment handled under current rules. Deductions documented properly throughout the year. Quarterly estimates set so April isn’t a scramble. The return reflects planning done through the year, not discoveries made at the deadline when it’s too late to do anything about them.
Real Numbers to Run The Business
Real Numbers to Run The Business
Daily reconciliation that catches problems early. Cost of goods by period so you know your actual margin. Monthly closes and financial reports that show reality, not hoped-for results. When you’re deciding whether to adjust menu prices, add staff, or open another location, you have the data in front of you. That’s the difference between guessing and deciding.
Planning-First Tax & Accounting
The Next Step:
Start a Conversation
We begin with a clear understanding of your business, then define the engagement and establish pricing from the outset.