November 29, 2022

Turn your taxing situations into savings opportunities

Association’s webinar with Frost Law tax experts explains how to get the most out of your returns.
Woman using laptop
With operators prepping to pay taxes for 2022, the National Restaurant Association recently held a webinar with Frost Law that offered advice on how to get the most out of this year’s returns and plan properly for 2023.

The webinar, “Don’t Leave Money on the Table: Commonly Missed Tax Planning Opportunities for 2022 and 2023,” shared tips on:
  • year-end planning for restaurants, including bonus depreciation, business expenses, ERTC maximization and tax planning, and
  • planning for 2023 including the work opportunity tax credit, research and development credit, and planning for long-term sustainability
Rebecca Sheppard and Peter Haukebo, both directors and tax attorneys at Frost Law, headed up the panel, which was moderated by Association VP of Public Policy, Aaron Frazier.

“Our goal is to make sure these tax credits are part of your overall operational and strategic framework going into 2023,” Frazier said.

Here are four of the biggest ones to build in:

1. Employee Retention Tax Credit. Sheppard and Haukebo began by addressing the issue of ERTC claims, which many operators took advantage of at the outset of the pandemic. Those claims, however, differed from any Paycheck Protection Program money the operation received, and were never going to be forgiven by the government like PPP claims were. Now, as the IRS looks at ERTC claims, restaurant owners who received the credits must make sure they can prove the credits claimed were sound or risk being audited and being made to repay them.

This is not like PPP,” Haukebo said. “It's not a situation where the government is reviewing and blessing your claim. They're looking at numbers, and if you don't have a good sense of what went into those numbers, that’s something you want to look at and be ready to explain before the IRS comes in and audits you. Because that’s what we’re starting to see.

Sheppard added that at the very least, operators should make sure they understand what they've claimed, and why they think they’re eligible, plus have ready access to all the paperwork to back up their claims. “If there are any issues, amend, correct and repay them to avoid potentially harsh penalties and interest on these credits,” she said.

2. FICA Tip Credit. Sheppard and Frazier said operators who aren’t taking advantage of the tip credit should start doing so now. If your tipped employees made above the federal minimum wage ($7.25/hr.), you may be eligible for the FICA Tip Credit. Frazier indicated that quickservice and fast-casual chains are providing customers the option to tip employees on touchscreens and through apps. “This is something that’s starting to evolve beyond the traditional fullservice model and should be considered when you're doing your tax planning,” he said.

“The tip credit is out there,” Sheppard added, so make sure you know there are advantages for you there as well.”

3. The Work Opportunity Tax Credit. This is another big opportunity for operators. WOTC is a federal tax credit available to employers who hire workers from certain targeted groups facing significant barriers to employment. It was set to expire but was extended to credit wages paid or incurred for some individuals starting work on or before Dec. 31, 2025. The extension will give operators two more years to take advantage of this credit.

4. Bonus Depreciation Credit. Another type of potential savings is the bonus depreciation regarding the purchase of equipment, Haukebo said. “Dollars on the table are dollars on the table, and you don't want to leave them there.

“That’s why it’s important to figure out ways to purchase equipment and time those purchases in a way that’s beneficial for you [like at the end of the year],” he continued. “The bonus depreciation allows a business to immediately deduct a larger percentage of the purchase price of an eligible asset. It’s only applicable to certain business assets, such as [an oven] with a useful life of 20 years or less.”

The depreciation credit, however, is expected to phase out in 2023, but could be resurrected in different legislation in future, he added.

These are just some of the tax savings opportunities discussed during the presentation. Download an On Demand recording of the full webinar, free of charge, here.