Essential documents restaurants need to prepare for tax season

In the restaurant industry, getting ready for tax season can sometimes feel like prepping for a five-course dinner for 300 people. Collecting receipts, organizing paperwork, tracking down statements, and collecting all the necessary financial reports and documents can feel like a full-time job. With proper restaurant accounting and bookkeeping, essential documents and financial reports should be easy to collect.  

Restaurant owners often find themselves wondering what their restaurant CPA needs. Whether your restaurant CPA is doing your individual returns, business returns or both, here’s what they need to get you the best tax results possible.  

Individual tax returns 

Income statements such as W-2s and MISC-1099s  

If you’re taking income from your restaurant, make sure you issue yourself a W-2 or MISC-1099. You’ll also need to include other 1099 forms pertaining to your individual tax situation.   

Schedule K-1 for trusts, partnerships and S corporations  

If you are a partner in a restaurant business, you will want to include your K-1. This form documents your share of the business’s income, deductions and credits.  

Tax deduction records  

If you choose not to take the standard deduction for your filing status, you’ll want to include documentation supporting your itemized deductions. Documentation for restaurants includes receipts, mortgage interest deductions, contributions to retirement accounts and taxes paid to state and local governments.  

Last year’s tax return  

For reference, make sure your CPA has your most recent tax returns. This helps ensure nothing is missed and allows you and your CPA to track your financial history.  

Miscellaneous forms  

Besides W-2s and 1099s, you will also want to include forms for other sources of income. Include interest earned and dividends statements, brokerage statements, real estate transaction paperwork and other relevant documentation, including canceled debt and bankruptcy paperwork.  

Keep in mind that tax rates can fluctuate depending on your total gross taxable income and unearned income, marital status, filing status and number of dependents.  

Restaurant business tax returns  

There is nothing like gathering your restaurant’s financial statements to drive home the importance of tight restaurant accounting systems, solid restaurant bookkeeping and adherence to record retention best practices. Make the end of the year easy on yourself by keeping good records and timely restaurant accounting reporting throughout the year.   

If restaurant accounting is proving difficult for your restaurant bookkeeper, consider hiring specialized restaurant bookkeepers, increasing your staff accounting professionals or outsourcing your day-to-day restaurant accounting needs by hiring restaurant bookkeeping services.  

Financial statements  

Having clean and up-to-date financial statements will not only decrease time spent collecting documentation and stress, but it will also decrease your CPA’s fees since they won't have to spend as much time going through your documents and cleaning up your bank statements.  

Restaurant accounting software solutions  

If you are not already using restaurant-specific accounting software, start now. Even with an excellent restaurant bookkeeper, the right restaurant accounting software will help your end-of-year tax prep go more smoothly. QuickBooks is a popular financial software option. There’s also restaurant-specific accounting software. Restaurant 365 is popular with restaurant businesses of all sizes. Also, consider integrating a restaurant-specific point of sale (POS) system.   

Corporate financial information  

Your restaurant's financial statements include cash flow statements, current balance sheets and income statements, and profit and loss statements. You will also want to include a list of your restaurant’s assets, expenses and statements for accounts payable and receivable.   

Capital asset activity 

If you bought or sold assets in the past year, include a report on each. Your CPA may suggest a cost segregation study to maximize your tax position on assets. In 2023, capital asset purchases are eligible for an 80% deduction. A cost segregation study will help you target eligible assets. Send your CPA a report of any fixed asset additions or disposals and an accurate inventory balance.  

Company vehicles  

If your restaurant uses a delivery vehicle, food truck, or your personal vehicle for restaurant business, your CPA will need documentation to determine operating costs for a tax deduction. Be sure to track mileage throughout the year. Accounting software can help you track this.  

Form 1098 mortgage and property taxes  

Like your individual return, you can write off the interest on the loan and taxes if your business owns property.  

Estimated taxes paid 

Throughout the year, you should be paying estimated taxes on your business as well as payroll taxes. Be sure to keep a running total and report the amount paid to your CPA.   

You may also be paying self-employment taxes on your income and excise taxes on products you produce and ship. Also include statements on accounts payable, accounts receivable, restaurant staff payroll and other accounting records. Your CPA will need to know about those as well.  

Business structure  

The forms you’ll file will vary depending on your restaurant’s business structure.  

For a sole proprietorship and single-member LLC, use Schedule C and file with your personal taxes by April 15 for the previous year.  

Multiple-member LLCs file returns on Form 1065 with a Schedule K-1 for each member due by March 15 for the previous year.   

Partnerships file a Form 1065 with Schedule K-1 for each partner by March 15th or the 15th day of the third month after the end of the company’s tax year.  

Corporations file Form 1120. There is no K-1 for shareholders, as corporations pay their own taxes. The due date for filing taxes is April 15, or four months after the end of the tax year.  

S corporations will file Form 1120 S with a Schedule K-1 for each shareholder, due by March 15 or three months after the end of your restaurant’s tax year.  

If you are self-employed, you will pay quarterly taxes on Form 1040-ES with filing dates of April 15, June 15, September 15 and January 15 unless the 15th of the month falls on a weekend or holiday, in which case, you will file the next business day.  

Document retention  

A rule of thumb on document retention is to keep everything for at least seven years. If you have any questions on what you should keep or need to include, reach out to your CPA.  

Restaurant accounting and restaurant bookkeeping best practices  

Staying organized and up-to-date accounting records is daunting, but manageable if you stay on top of your restaurant accounting throughout the year. Practice solid, generally accepted accounting principles (GAAP) and internal controls. Restaurant financial experts and restaurant-specific financial software can help you do it.   

How Baker Tilly can help restaurants 

Financial accounting for restaurants and restaurant bookkeeping can be complicated. Working with experienced restaurant bookkeeping services and the right accounting software can simplify things.   

When looking for accounting firms, consider ones with restaurant industry experience. Baker Tilly understands your restaurant's accounting needs. We can help streamline your financial operations and keep your restaurant bookkeeping accurate and manageable.