As your local’s favorite bar, registering a growth trend in your business income comes with a fair share of smiles and frowns. No doubt, this depends on the tax law in your state and especially if you’re a small business. Whether you’re finding it hard to keep up with federal taxes, reviewing bulky tax documents, or considering free tax software, being in the tax industry loop may prove very helpful. On that note, read on for five essential things you ought to know as a bar owner.
1. Be as tax knowledgeable as possible.
As a small business owner managing a thriving bar, your circle of competence should go beyond brewing great beer and fielding smooth customer service. You should also be knowledgeable about the range of taxes applicable to the hospitality industry and bars in general. Depending on the state or country, this may include:
- Property Taxes: These are taxes paid on the ownership of physical assets in a particular state based on the value of your property and the general property tax provisions by your state. It may apply even if it’s a rental property.
- Sales Tax: Bar owners ought to pay sales taxes applicable to all drinkables sold to customers, be it from your alcoholic beverage distributor or any other source.
- Payroll taxes: A bar owner ought to report and pay social security and medicare on tips received by your employees.
- City taxes: These are additional federal income taxes usually managed by your municipality or locality.
- Liquor licenses: For the general hospitality industry, players ought to have permits renewable annually for the sale of alcoholic beverages.
Ultimately, a well-rounded overview of the range of taxes that could apply to you will help keep your head above the tax waters.
2. Think about the simple tax vs turbo tax option.
Managing tax responsibilities is no easy task, and going digital might relieve a bar owner of the significant burdens. Typically, your digital journey is likely to begin with a front seat at the SimpleTax vs TurboTax debate or the question of “What is the best tax software or mobile app?”
Although answers may vary depending on your information source, digital filing of taxes and overall tax management is a priority. Essentially, three factors to consider in sticking with a digital platform are convenience, data security, and affordability in rates. Quickbooks perhaps counts as an honorable mention.
3. Recording your expenses is vital.
The management of taxes has everything to do with numbers and currency signs and needs to take records with strict scrutiny. Keeping accurate records is vital in tracking tax deduction expenses, verifying sales, recording purchase, and validating proper withholding of your business.
Notwithstanding, poor record keeping is a disservice that only keeps you in the dark. It can make it difficult to challenge an audit and may lead to severe financial upsets for you as a bar owner. Typically, an online software should help you sort out your tax recording responsibilities efficiently, especially if there’s a paid version with customizable features at an affordable rate per period.
4. Don’t be a victim of improper tax compliance.
In previous years, taxing authorities have resorted to several enforcement methods, including business seizures to redeem debt due to them. For example, the IRS may suspend a taxpayer’s U.S passport if the said taxpayer owes more than $50,000 in taxes, penalties, and interest. Given that other tax authorities could take far more severe measures, being a victim of improper tax compliance is likely a no-go area for any bar owner. Ultimately, mainstreaming tax compliance in your management strategy is an excellent way to go.
5. Try to always seek clarity.
Tax-related issues can be very annoying to manage, especially on a Monday when all you care about is how the weekend can come around faster. For instance, depending on the jurisdiction and their tax act, the definition of taxable food and the taxability of beverages sold with side chops may have varying tax rates. Confusing as these issues may seem, they are the current realities business owners go through daily.
However, it behooves bar owners to anticipate this confusion and seek clarity from a broker or any tax expert in general. Alternatively, online resources may provide step-by-step guidance in staying on top of issues; the danger here is to be mindful of the credibility or whether the references relate to the United States or your country.