Every restaurant owner has to pay taxes on tips that are given by customers. The process of calculating the tip income tax is a bit tricky which is why the services of a reputed accountant for restaurants Orlando must be sought. In some cases, employees have to report all of their tip income and in others, they report only a percentage of it. Though the employees do pay taxes on this income, the restaurant owner also has to fulfill certain responsibilities. Your chosen accountant for restaurants Orlando can guide you more about this, but for right now, here is a quick look at what is involved.
Keeping a track of tips
As the restaurant owner, you must make sure that all of your employees provide you a proper report on the tips they earn. You may find this difficult if too many tips are provided at your restaurant, but if you enforce effective policies, keeping a track will not be that hard. You will also have to prepare a report that contains details on the tips of each employee and provide this to the IRS every month. Your chosen accountant for restaurants in Orlando can guide you more about this.
Using a POS system will simplify this task because every employee will be able to enter details about their tips after every shift.
Filing Form 8027
The IRS has made it mandatory for large restaurant owners to file the 8027 or the “Employer’s Annual Information Return of Tip Income and Allocated Tips” every year. If you have kept a track of your employees’ tips, filling out this form will be easy, and you will get over with it in just a short time.
According to the IRS, large restaurants are those which prepare their meals on the premises, allow their customers to dine at the premises, receive regular and frequent tips, have 10 or more employees that work for 80 hours collectively on a daily basis. Ask your accountant for restaurants Orlando and he will inform you if you will have to file the 8027 form or not.
Make use of the eight percent rule
You have to report a tip that is 8% or more of the gross receipts of every employee. Generally, servers and waiters are given a tip that is around 15% to 20% of the meal price, but the IRS only requires 8% of this and considers it to be a fair estimate. If your employees will claim their tips using the 4137 form, you will have to deduct 8% of an employee’s sales in every pay period. In case an employee’s tip is less than 8%, the liability of paying the difference falls upon you.
Dealing with credit card tips
If your customers pay tips through credit cards, taxes will be considerably simplified for you because your employees will not be able to conceal their earned tip amounts. Using a POS system is helpful in this regard because every transaction is automatically adjusted for tips and you will be able to view detailed reports.
If you need more information about our Orlando accounting and tax services, please contact us at 407-344-1012. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, and Hunters Creek, FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin numbers, incorporations, and non profit 501c3 tax exempt status applications.