Restaurant payroll is complicated business. Along with market factors that lead to high staff turnover and a diverse set of pay and compensation standards for different positions, federal and state governments have applied specialized form filing requirements and a high level of scrutiny for restaurant hiring practices and employee verification. Not to worry. Advanced Micro Solutions (AMS) has information resources and software solutions that can guide you through the process.
If you haven’t already checked it out, visit our main resource center for restaurant payroll software. In this space, we wanted to point a couple specific issues and opportunities with payroll that restaurant owners and managers should definitely know about.
Employer-Provided Meals
One common issue with restaurant payroll is the practice of employer-provided meals. Here’s a great example of how things can quickly get confusing: The IRS counts meals as a fringe employee benefit that counts toward the taxable income UNLESS they are furnished on the premises and used for the convenience of the employer (such as making it easier for employees to manage their duties without leaving the premises).
Well, okay then. If you’ve ever worked in or managed a restaurant, you know this practice is commonplace. In the restaurant, what counts as a “break” for servers is already pretty murky. Free food from the restaurant during shifts is a popular trade-off for managing these breaks around the restaurants’ needs. In this way, the exception is the rule when it comes to employer-provided meals. Still, you need to know what the rules are so you don’t unintentionally break them and end up the hook for a bunch of money.
FICA Tax and Tip Credit
Here’s another big complication for restaurants, many of which pay more in FICA taxes than they need to. The short story is that if you pay tipped employees the regular minimum wage or more, you can claim a FICA tax credit for the difference between the server-based minimum wage ($2.13) and the applicable minimum wage standard for that year ($5.15 or $7.25). To make things even more complicated, you claim the credit on your restaurant’s business income taxes using Form 8846, even though the credit is based on FICA taxes paid on this tip income.
Confused yet? You can find general information about this tax policy and its implementation from the Treasury Department. You can also find more specific instructions from the IRS.
Software and Accounting Services for Restaurant Payroll
With this in mind, it’s no wonder that many restaurants hire an accountant—and that many accounting professionals specialize in the restaurant and hospitality industry. Determining the best way to set up your restaurant operations to maximize efficiency—including income and payroll tax liabilities—is tough enough. Let a software solution execute this plan and manage your payroll going forward.
Advanced Micro Solutions (AMS) is an industry leader for restaurant payroll and form filing software, but we don’t mind connecting you with other software developers. Our modular software approach is perfect for restaurants looking to pair AMS Payroll with other restaurant software. Beyond payroll and employer filings, there are many types of restaurant management software features out there.