UPDATE: Federal guidelines have been clarified since the publishing of this article. Funds expended through the Restaurant Revitalization Fund are not subject to single audit requirements. As a result, these funds should not be accumulated in determining the total funds expended for single audit determination. Economic Injury Disaster Loan expenditures are subject to single audit requirements if certain thresholds are met and the information in this article applies to this funding stream.
Keeping up with the ever-changing business environment doesn’t have to be taxing! Check out the top 10 restaurant topics we’re keeping an eye on.
- Employee Retention Tax Credit (ERTC): A refundable payroll tax credit for restaurants impacted financially by COVID-19 during 2020 and 2021. Unlike other relief, these refundable Labor Shortage credits are taxable.
- Labor Shortage: It is no secret that labor is the biggest challenge facing operators. Attracting and retaining talent will be critical for a successful year. Operators are challenging themselves to find creative solutions outside the norm to solve this problem.
- Labor & Commodity Prices Rising: Wage increases coupled with rising commodity prices and inflation will continue to be a challenge and require owners to carefully manage their costs during the year.
- Third-Party Delivery Fees & Sales Tax: With the growing demand for delivery, many operators are still struggling to manage and control third-party delivery fees. A byproduct of delivery creates additional sales tax compliance based on local sales tax rules.
- Outsourced Accounting: Now more than ever, owners are evaluating and shifting their accounting function to a third party. The rapid shift to virtual has supercharged this, and for many operators who do not need a robust back office, it can be an efficient solution.
- Estate & Succession Planning: The lifetime estate tax exemption continues to be a hot topic politically. Owners should plan carefully and evaluate all liquidity planning options, including family transfers, ESOPs, management buyouts, partner buyouts and third-party/strategic buyer/private equity sales.
- Robust Merger & Acquisition Market Despite COVID: With low interest rates and the market flush with cash, certain restaurant industry segments such as QSR, fast casual and pizza concepts are extremely strong in the M&A market.
- SALT Cap Planning: Individuals who report income through a Partnership or S-corporation can directly boost their federal deduction of state and local taxes (SALT) on their individual income tax returns as it relates to select state law changes.
- PPP Loan Forgiveness: File timely for loan forgiveness before the 10 month window from your covered period end date to avoid the automatic repayment terms. Borrowers can seek forgiveness through the term of their loan (2 or 5 years). Be certain to coordinate PPP loan forgiveness and ERTC to maximize both benefits.
- Lease Accounting: For GAAP purposes, lease accounting under ASC 842 is now required for calendar year 2022 and beyond. This new standard will impact all restaurants with GAAP-basis financial statements.
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