It’s Time to Review Your Tax Return! What Restaurant Owners Should Look for Before Filing
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For restaurant owners, tax season isn’t just about compliance…it’s about strategy.
Before you sign and file your return, it’s worth taking a step back and asking a simple question: does this tax return actually reflect how my restaurant operates and how I build wealth?
As a CFP®, I see many restaurant owners file returns that are technically correct—but financially inefficient. A careful review before filing can uncover missed opportunities, reduce future tax exposure, and improve cash flow.
Here’s what every restaurant owner should review before the return goes out the door.
1. Is Your Entity Structure Still Working for You? Your tax return reflects how your business is structured—but not whether that structure still makes sense.
Common questions to revisit:
· Are you operating as a Schedule C, partnership, or S corporation?
· Has your profitability increased enough to justify a different structure?
· Are you paying yourself appropriately (especially in an S corp)?
If your income has grown or your business model has changed, your entity structure may be costing you unnecessary self-employment or payroll taxes.
2. Are You Maximizing Payroll and Tip-Related Credits?
Restaurants have access to unique tax benefits, but they’re easy to miss.
Before filing, confirm:
· Tip income is accurately reported
· You’re claiming any applicable FICA tip-related tax credits
· Payroll taxes are calculated correctly for tipped wages
Improper reporting doesn’t just increase audit risk—it can eliminate credits you’re otherwise entitled to.
3. Did You Fully Capture All Legitimate Deductions?
Restaurant deductions are nuanced, and generic tax prep can miss key categories. Pay close attention to:
· Cost of goods sold (and inventory treatment)
· Repairs vs. capital improvements
· Equipment purchases and depreciation elections
· Meals, uniforms, and required training expenses
· Software, POS systems, and third-party delivery fees
Small classification errors can snowball into meaningful tax differences.
4. Are Depreciation and Expensing Elections Intentional?
Section 179 and bonus depreciation can significantly reduce taxable income—but they’re not always the best long-term move.
Ask:
· Were large write-offs chosen strategically or by default?
· Would spreading depreciation improve future flexibility?
· How will today’s deductions affect next year’s taxes or a potential sale?
This is where tax prep should align with financial planning, not just short-term savings.
5. Is Your Retirement Strategy Reflected Correctly?
Your tax return should tell the story of how you’re saving for the future.
Review:
· Contributions to SEP IRAs, Solo 401(k)s, or 401(k)s
· Whether Roth strategies (including Backdoor Roths) were properly reported
· Required forms, such as Form 8606, if applicable
Missed or misreported retirement contributions can undo some of the most powerful planning strategies available to restaurant owners.
6. Are You Planning for Next Year—or Just Reporting Last Year?
The biggest mistake I see is treating the tax return as a rearview mirror only. Before filing, use it as a planning tool.
· What was your effective tax rate?
· Which income streams were taxed most heavily?
· Where could adjustments reduce taxes next year?
Your tax return should help inform decisions about compensation, expansion, staffing, and reinvestment.
Final Thoughts
If your tax return only answers “What do I owe?”—it’s incomplete. A strong pre-filing review helps restaurant owners reduce future tax exposure, improve cash flow, avoid compliance surprises and align taxes with long-term wealth planning.
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