Restaurant & Hospitality Accountant
Payroll with tip reporting, sales tax returns, plus cost tracking for restaurants, bars, cafes, hotels, caterers, franchise owners.
Thin Margins Leave No Room for Loose Books
A restaurant can be full every night yet still lose money. Food costs move week to week, labor shifts with the schedule, cash plus card tips pass through the business on their way to staff. When the books run a month behind, owners discover a problem only after it has already cost them.
We keep the books current for restaurants, bars, cafes, hotels, caterers, then report food cost plus labor cost as a share of sales so you can watch each one move. Franchise owners get the same reporting for every location they run.
Working from your point-of-sale data
Most of what your accountant needs already sits in your POS system. We work from the sales, tip, discount reports produced by systems such as Toast, Square, Clover, then reconcile them to your bank deposits. Sales, tips, sales tax each land in their own account instead of one blended deposit line.
Our Restaurant & Hospitality Accounting Services Include:
- Payroll processing with tip reporting
- FICA tip credit claims (Form 8846)
- CDTFA sales tax returns
- Food & labor cost tracking
- Monthly bookkeeping
- Inventory accounting
- Entity setup for new locations
- Tax planning & return preparation
Tip Reporting Done Right
Tips create obligations for the employee as well as the employer. Staff who receive $20 or more in tips during a month must report them to you by the 10th of the following month. Those tips then run through payroll, where they are subject to withholding for income tax, Social Security, Medicare.
California adds rules of its own. Employers here cannot count tips toward minimum wage, so each tipped employee earns the full minimum before any tips. Card tips cannot sit in the business account past the next scheduled payday. Our payroll service builds both rules into every pay run.
Large food or beverage establishments
Form 8027 applies when three conditions are met: food or drinks are consumed on the premises, tipping is customary, the business normally had more than 10 employees working over 80 combined hours on a typical business day during the prior year. The form reports gross receipts next to the tips employees reported. Fast food operations are excluded, as is any business where the food is not eaten on site. We confirm whether the rule reaches you, then prepare the filing each year.
The FICA Tip Credit
Employers pay their share of Social Security plus Medicare tax on the tips employees report. The FICA tip credit gives much of that cost back. It covers employer tax on tips above the amount needed to bring an employee's pay up to $5.15 an hour, the federal minimum wage in effect in January 2007. Because California wages already sit far above that figure, nearly all of the employer tax on reported tips usually qualifies. We claim it on Form 8846 every year.
Beginning with 2025 tax years, the credit also reaches beauty service businesses such as barbers, hair salons, nail studios, spas. Hotels running a salon or spa should ask us whether it applies to them.
No tax on tips for your staff
For 2025 through 2028, employees in occupations that customarily received tips can deduct up to $25,000 of qualified tips on their own returns. The deduction shrinks once modified adjusted gross income passes $150,000, or $300,000 on a joint return. Only voluntary tips qualify, so mandatory service charges do not. Employers now report qualified tips separately on Form W-2, which we handle as part of payroll.
Sales Tax on Meals, Service Charges & Tips
Restaurant sales of meals or drinks are generally taxable in California, reported to the CDTFA on a regular sales tax return. We prepare that return from your POS data, matched to the sales recorded in your books.
Service charges are where restaurants most often go wrong. The CDTFA looks at who put the amount on the check. If the restaurant did, the charge counts as part of the taxable sale, whatever label appears next to it. Sending the money on to staff leaves the tax in place. A tip the guest decides to leave is not taxable. We review how your checks present these charges so the return reports each one correctly.
Planning for Equipment, Build-Outs & New Locations
Kitchen equipment, furniture, POS hardware bought for the business can often be deducted in full in its first year under 100 percent bonus depreciation, now permanent for property acquired after January 19, 2025. Interior improvements to a restaurant space can qualify too when they meet the rules for qualified improvement property.
A second location raises questions of its own: whether it belongs in the same entity, how to keep each lease separate, how payroll will run across sites. We work through the structure with you before you sign, then set it up through our business formation service.