The Taxman Cometh
Let’s face it. Tax season can be stressful.
How can we alleviate the tension that comes with this dreaded season? While the do-it-yourself approach may seem cost effective today, in the end, it’s usually not. Having a professional handling the job will actually save money and time while reducing pressures as tax day looms.
CPA & Partner, CohnReznick LLP
San Diego, California
Just as we rely on our chef to understand and be ahead of the curve in food trends and innovation, we need our financial adviser to be an expert when it comes to industry-best practices for tax compliance (obeying tax laws) and tax planning (reducing overall tax burden). Marshall Varano, CPA, a partner at CohnReznick LLP in San Diego, California, who leads the firm’s restaurant practice, said many operators initially resist using a CPA but ultimately find that an expert’s knowledge leads to substantial savings. Restaurant-specific deductions, state and federal credits, and proper documentation for the foodservice industry are complicated. “Often in that first meeting with an operator we uncover missed opportunities for savings and deductions that work to the benefit of the restaurant,” said Varano. “Operators are actually likely to come out of that first meeting better off than when they went in, and that takes into account the CPA fees.” In fact, Varano said he has often seen the amount of savings add up to several years of accounting fees.
In addition, a knowledgeable accountant can troubleshoot problems to avoid unwanted attention from the IRS. “Things like combining personal and business activities or taking loans out from your business should be avoided. This is where you want to consult and rely on your CPA for how to handle special circumstances,” said Varano. Other areas that may ignite concern from the IRS include large and/or recurring losses, excessive expenses classified as miscellaneous, and low W-2 wages when compared to sales (which might indicate a misclassification of employees versus independent contractors), to name
CPA & Shareholder, Mize Restaurant Group
Overland Park, Kansas
What to Look For in Your CPA
Once the decision is made to consult a professional, the task of choosing a CPA needn’t be daunting. Sean Dawson, CPA and shareholder of accounting services for Mize Restaurant Group in Overland Park, Kansas, suggests finding a CPA whose clients are similar to you. Dawson recommends asking other operators for referrals. When interviewing prospective accountants, ask them to name other restaurants they support.
“A CPA with extensive restaurant experience can benchmark your successes and help improve your business,” said Dawson.
Your CPA’s connections can become critical when an owner is looking for additional capital. Dawson said his team can often help with financing due to solid relationships with bankers in the industry. “Also, accessibility is key. When selecting a CPA, don’t hesitate to ask, ‘Hey, will I be able to call you whenever I have a question?’”
Knowing when to call the CPA is important. While any concern should be met with an open line of communication, there are specific situations that warrant a special call. Let your CPA know of any plans to remodel or refresh, open a new store, make minor or major expansions, add new equipment or delivery trucks, or hire new part-time or full-time people. “Be proactive. In the end, it always saves money,” Dawson added.
D. Matthew Patrick
CPA & Managing Partner, Patrick Accounting & Tax Services
Memphis & Nashville, Tennessee
It’s Time to Get Organized
“Overall stress reduction starts with feeling in control,” explained D. Matthew Patrick, CPA, managing partner at Patrick Accounting and Tax Services in Memphis and Nashville, Tennessee. Although a restaurant’s priority is of course serving delicious food, a very close second should be having a sound set of financial statements. Patrick too encourages operators to work with accounting firms that specialize in restaurants. Once a specialist is hired, communication should be monthly. “Every owner should have access to complete financial understanding at any given time of the year,” urged Patrick. Bottom line: Don’t wait until the end of the year to think about taxes. Taxes are a year-long concern.
“Also, keep an eye on excessive expenses for travel, entertainment, meals and home office deductions,” warned Patrick. “While these all can be legitimate expenses, they need to be documented properly.”
Finally, contrary to popular belief, personality matters, even with accountants. “A firm doesn’t have to be local to be effective. Choose one with the right expertise and personality for your business,” advised Patrick.
“In the end, a good CPA can help you sleep better at night,” said Varano. And, a good night’s sleep is the best defense against tax season.
[This article is intended for general informational purposes only and is not intended to provide, and should not be relied on for, legal, tax, or accounting advise.]