A Final Tune-up Before Filing

My accountant is now preparing my 2005 business and personal returns. As a restaurant owner, what should I look for to make sure that I am paying the least amount of taxes?

Here are some business areas to address:

  • If you built a new restaurant or had major construction, a cost segregation analysis of the build-out should be done to take advantage of allocating costs from 39-year property to 5-year property.
  • Make sure that you expensed up to $105,000 of tangible personal property placed in service in 2005.
  • 2005 is the last year you can receive beneficial 15-year depreciation (vs. 39-year) on leaseholds improvements. This is available on improvements made to real property that has been in service for more than 3 years.
  • Write off any tangible personal property that is no longer on your company's books. This will help reduce taxes in states that have personal property taxes.
  • Determine if your restaurant and its employees are situated in either an empowerment zone or renewal community zone. You may be eligible for substantial credits on your employees' wages. You can identify these areas by going to http://egis.hud.gov/egis/cpd/ rcezec/welcome.htm [3]
  • Identify whether it is advantageous to take the FICA tip credit or Work Opportunity Tax Credit. If you are an S corporation or Partnership, whether the owners are in AMT may affect whether you take the current year credit.
  • If the restaurant is an S corporation or Partnership and has losses, be sure to determine that the shareholders/ partners have tax basis in order to take advantage of these losses.
  • If FICA tip credit and WOTC are taken, consider your state's particular treatment.
  • Take advantage of the income deferral of gift certificate sales if they have not been redeemed within the past two years.

Next month: Personal returns.

Got a tax question that's driving you crazy? Tax expert Adam Berebitksy of SS&G Financial Services answers them each month in RH.

Adam Berebitsky, CPA, is Director of Tax for SS&G Restaurant Services Group. Reach him at 800-869-1834 or [email protected] [4]