• Many restaurateurs are required to file tip-reporting data with the IRS. If you operate a business where food and beverages are served for on-site consumption and tipping is customary, and you employed more than 10 workers whose combined hours exceeded 80 on a typical business day in the previous calendar year, you are required to file Form 8027 with the Internal Revenue Service for each food-and-beverage establishment. The Employer’s Annual Information Return of Tip Income and Allocated Tips is due Feb. 28 for employers who file the form on paper, or April 1 for employers who file the form electronically. Form 8027 requires employers to show gross receipts, charged tips and the amount of tips employees reported during the preceding year, among other data. Visit the IRS website to download the form and instructions.
• Restaurateurs might qualify for a federal income tax credit for the FICA payroll taxes they pay on certain employee tips. Employers are required to pay FICA payroll taxes, currently 7.65 percent, on all tip income that employees receive. The law allows employers to take a dollar-for-dollar federal income-tax credit for a portion of the FICA taxes they pay on certain employee tips. The so-called 45B credit, named for its place in the Internal Revenue Code, can be claimed by filing Form 8846 when you file your federal tax returns. The form can be downloaded from the IRS website: See Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.
• It’s a good time to remind employees about what the law requires on tip reporting. Employees who receive $20 or more in tips in a month are required to report them to their employer at least once a month. Employees who haven’t reported and paid taxes on their tips throughout the year can declare and pay taxes on those tips at tax time. However, they could face penalties for having failed to report income the way the law requires. The National Restaurant Association sells a Tip Reporting Education Kit that includes an employer guide, employee brochures, posters and other materials to help operators convey the message to employees about how to report tips correctly.
Government Relations
Restaurant Advocate Testifies on Health Care Law Challenges
Marshall “Ken” Conrad, of Libby Hill Seafood Restaurants, Inc. in Greensboro, North Carolina testifies to the House Subcommittee on Health, Employment, Labor and Pensions of the Committee on Education and the Workforce, U.S. House of Representatives about the challenges restaurants are facing as the controversial Affordable Care Act continues toward implementation of the employer and individual mandates in 2014.
Mr. Conrad, speaking on behalf of the National Restaurant Association, offered a critique of the ACA’s main access provisions.
Since the law was enacted in 2010, me and my staff have educated ourselves about the requirements of the law, the details of the Federal agencies’ guidance and regulations, and to understand how to implement the necessary changes within our organization. Understanding our compliance requirements has been time consuming and burdensome. Currently we do not have human resources personnel on staff responsible for administering the health benefits program as part of their duties. Instead, we are relying on our lawyers and outside vendors to help us determine our options and implement the law within our business. This is typical of restaurants of similar size to our operations. Our Chief Financial Officer has primary responsibility for developing our strategy and plan to comply with the law. Both he and I have spent a significant amount of time trying to understand the impact so that educated business decisions can be made.
Until the January 2, 2013 Proposed Rule regarding the Shared Responsibility for Employers provision, employers did not have any firm rules on w hich they could plan and make business decisions. Up until this time, proposals and guidance had been issued with numerous opportunities for public comment, but nothing had the weight of regulation. This proposed rule, while not finalized, does provide employers assurances that the rules proposed can be relied upon until further rules are issued. Our Association has been educating the industry since enactment and doing everything we can so that operators know that now is the time to take action to comply. While many rules and guidance have been proposed, questions still remain regarding exact implementation of many of the employer requirements.
The unique characteristic of our workforce creates compliance challenges for restaurant and food service operators. As a result, many of the determinations employers must make to figure out how the law impacts them – for example the applicable large employer calculation – are much more complicated for restaurants than for other businesses who have more stable workforces with less turnover.
Restaurants are employers of choice for many looking for flexible work hours and so we employ a high proportion of part-time and seasonal employees. We are also an industry of small businesses with more than seven out of ten eating and drinking establishments being single-unit operators. Much of our workforce could be considered “young invincibles,” as 43 percent of employees are under age 26 in the industry.
In addition, the business model of the restaurant industry produces relatively low profit margins of only four to six percent before taxes, with labor costs being one of the most significant line items for a restaurant.
All of these factors combine to complicate what a restaurant and foodservice operator must consider when implementing the necessary changes in their business to comply with the law. My company is a great example as we have spent a large amount of time trying to understand the law and what we must do to comply, but still do not know the answers to many questions. MORE
15-Year Depreciation Bill Introduced in Senate
From the National Restaurant Association:
Sens. Bob Casey (D-Pa.) and John Cornyn (R-Texas) have introduced a bill to make permanent a 15-year tax depreciation schedule for restaurant improvements and new construction, leasehold improvements and retail improvements.
The National Restaurant Association supports the bill, which would allow restaurateurs, landlords and other owners of commercial property to continue to write off property improvements and the cost of new restaurant construction over 15 years. Without congressional action, the current 15-year depreciation schedule will expire and revert to a 39-year schedule at the end of the year. NRA research shows that restaurants undergo significant renovations every six to eight years, on average.
“Restaurants experience heavy wear and tear serving 130 million guests a day at nearly 1 million establishments nationwide,” said Scott DeFife, NRA executive vice president, policy and government affairs. “Making the 15-year depreciation provision permanent provides restaurant operators with the predictability needed to plan for future investments, and we commend Sens. Casey and Cornyn for their leadership on this critical issue for our industry.”
“Small businesses are the backbone of our economy,” Casey said. “We should provide them with the certainty they need to grow.”
The original cosponsors of the bipartisan legislation are Kay Hagan (D-N.C.), Debbie Stabenow (D-Mich.), Mike Crapo (R-Idaho), Bob Menendez (D-N.J.), James Risch (R-Idaho), Jim Inhofe (R-Okla.), Sherrod Brown (D-Ohio), Mark Begich (D-Alaska), Susan Collins (R-Maine), Amy Klobuchar (D-Minn.), David Vitter (R-La.), and Roger Wicker (R-Miss.).
Employers with Seasonal Employees Eagerly Await IRS Guidance on Health Care Law
The following article appeared in Reuters
IRS weighs US health coverage rules in tax lobbying fight
Are ski instructors seasonal workers that should get health care coverage by their employer under President Barack Obama’s healthcare overhaul?
That is just one of many details the U.S. Internal Revenue Service has to work out by January 2014, with hordes of special interest groups lobbying the agency between now and then.
Assigned to implement the employer coverage section of Obama’s 2010 Affordable Care Act, the IRS will hold a hearing at its Washington headquarters on Tuesday to hear from various groups interested in the so-called “pay or play” rules.
Under the rules, a large employer must pay an excise tax penalty if it fails to provide adequate coverage for even one full-time employee, forcing that employee to get a tax credit to buy health insurance through one of the new state insurance exchanges.
The IRS must write rules defining which employers, with 50 or more full-time employees, need to provide coverage. The rules also must spell out which employees qualify for this coverage.
The IRS issued proposed rules in January, which are subject to change following the hearing.
“These are very complicated issues” for the IRS, said Seth Perretta, a lawyer with Crowell & Moring LLP. “They’re working hard to come up with rules that employers will like, while trying to limit the possibility for manipulation.”
For example, the IRS has not yet fully defined a seasonal employee who qualifies for coverage, casting doubt over coverage for professionals such as ski instructors and, more meaningfully for most communities, school teachers.
Some school districts are worried their costs of coverage will rise for some employees over summer-break months.
The American Federation of Teachers, a union for teachers, warned in a March 18 letter to the IRS that the proposed rules could encourage employers to reduce employees’ hours.
The AFL-CIO, the largest labor federation, is worried employers might find loopholes to dodge health coverage.
“The proposed rule offers employers a myriad of ways to reduce the scope of coverage they currently offer,” the AFL-CIO said in a March 18 letter to IRS.
Temporary staffing companies are worried, too. They fear being hit by the law’s penalty if they do not provide health coverage to their temporary workers.
Hire Counsel, a temporary legal staffing firm serving law firms and corporations, is asking the IRS to exempt staffing agencies from providing health insurance for temporary employees, according to its March 18 comment letter.
In May, the IRS will hold a hearing on the “minimum essential coverage” healthcare rules.
The IRS is also expected to soon issue guidance on what new forms employers and employees must fill out for healthcare purposes.
NYC Sugary Drink Ban Overturned by State Supreme Court
Great news for restaurants and the food and beverage industry as a New York State Supreme Court overturned a ban on the sale of sugary drinks in containers larger than 16 ounces. The ban, authored by NYC Mayor Michael Bloomberg in 2012, was the first of its kind in the US and has proven highly controversial. The following is from a National Restaurant Association release:
The ruling by State Supreme Court Justice Milton Tingling in Manhattan came down just one day before the ban was supposed to take effect. Tingling said he found the ban to be arbitrary and capricious.
“It is arbitrary and capricious because it applies to some, but not all food establishments in the city,” Tingling wrote in his decision. “It excludes other beverages that have significantly higher concentrations of sugar sweeteners and/or calories on suspect grounds, and the loopholes inherent in the rule including but not limited to no limitations on refills defeat and/or serve to gut the purpose of the rule.”
The National Restaurant Association was a lead plaintiff along with the American Beverage Association in filing the lawsuit that challenged the ban. At the time of the filing, the NRA argued that the ban was arbitrary and subjected restaurateurs to a standard many of its competitors, including groceries and c-stores, didn’t have to meet.
As Tax Season Approaches, Questions for Tipped Employees
The National Restaurant Association provides a good recap of policies regarding tipped employees and reporting requirements for restaurants and golf clubs.
