Connections for Success



New Year’s Resolutions for Restaurants
James Pellino

Whether it’s getting that gym membership or tweaking your personal savings plan, people always want to hit the ground running at the beginning of a new year.  With all of these personal goals you’ve set up for yourself, it’s easy to forget about some key deadlines that relate to your restaurant.

The first couple of months of the new year are full of tax deadlines that are applicable to most restaurants.  Below are some deadlines to keep in mind:

Form 1099

1099’s are used to as a way for the IRS to track payments you’ve made throughout the year to certain vendors.   Below are the most common payments a restaurateur would make in respect to 1099 reporting:

  • Nonemployee Compensation:  Over the course of the business year, you’ve paid people or companies’ fees, commissions or other forms of compensation to perform certain services for your restaurant.  The IRS considers these payments nonemployee compensation and requires you to issue a 1099-MISC to the person or company if:
    • You made the payment to someone who is not your employee;
    • You made the payment for services in the course of your trade or business;
    • You made the payment to an individual, partnership, estate or, in some cases, a corporation;
    • And you made gross payments to the payee of at least $600 during the year.  Examples include (but aren’t limited to) payments to:
      • Professionals such as attorneys, accountants, architects, contractors, engineers, etc.
      • Independent contractors
      • Commissions paid to nonemployee salespersons
  • Rents:  You may have also paid rent to someone for either retail space or machinery.  You are required to issue a 1099-MISC to anyone you’ve paid at least $600 in rent.
  • Royalties:  You must also give a 1099-MISC to anyone you paid royalty payments to with regards to intangible property such as patents, copyrights, trade names and trademarks.  Any gross royalty payment of $10 or more must be reported (i.e., issue a 1099-MISC).
  • When to file 1099-MISC:  1099-MISC must be sent to recipients (people you’ve paid during the year) by January 31, 2013.  You must also file all 1099-MISC’s with the IRS.  If you are filing on paper, the 1099-MISC’s need to be filed with the IRS by February 28, 2013.  If you are filing these electronically with the IRS, they need to be filed by April 1, 2013.  It should also be noted that for paper filing with the IRS, Form 1096 must be attached to the 1099-MISC’s.  Form 1096 simply summarizes all of the 1099’s you’ve issued during the year.

Form 8027 – Employer’s Annual Information Return of Tip Income and Allocated Tips

The purpose of this form is for the IRS to determine if enough tips were included in employee wages based on your restaurant’s gross revenue.  If the amount of tips you reported on tipped employees’ payroll is less than 8% of your yearly gross receipts, you must allocate the difference to your tipped employees (increase their tips on their W-2’s until total tips reported equals 8% of your yearly receipts).

  • Who must file:  This form is required to be filed by large food or beverage establishments.  The IRS defines a large food or beverage establishment as an establishment where:
    • Food or beverage is provided for consumption on the premise;
    • Tipping is customary; and
    • More than 10 employees who work more than 80 hours were normally employed on a typical business day during the preceding calendar year.

You must file a separate Form 8027 for each establishment.  If there is more than one establishment operating within a single building, and, if gross receipts are recorded separately, each activity is required to file a Form 8027.

  • When to file:  The form is due by February 28, 2013 unless you are filing electronically.  Filing electronically will give you until April 1, 2013.  You can also file an extension (Form 8809) which will give you an additional 30-day extension.

Form W-2

Restaurateurs are probably most familiar with W-2’s when it comes to year-end reporting.  W-2’s are used to summarize remuneration you paid to employees for services performed and the applicable taxes that have been withheld.

  • When to file:  W-2’s follow the same filing deadlines as 1099’s.  W-2 recipients must receive their W-2’s by January 31, 2013.  W-2’s must be filed with the IRS by February 28, 2013 for paper filing and April 1, 2013 for electronic filing.  Also, a W-3 must be attached to the W-2’s when you file with the IRS.  Like Form 1096 mentioned above, Form W-3 simply summarizes all of the W-2’s you are filing for the year.

The beginning of the new year is always hectic and year-end reporting for your restaurant creates additional work, and often stress, on business owners.  If you need any assistance with your year-end reporting, please feel free to contact me or any of my associates at ORBA.

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