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Posts Tagged ‘Taxes’

It was kind of fun trying to come up with a decent headline for today’s article.  Tips are in the news a lot, lately.  Servers, and others who receive tips, don’t like handing out a portion of their tips to other co-workers and especially not to the “house” (management).  Now, we find that they don’t like “tipping out” to the big house, either!  It’s not like we didn’t know this, but apparently, the CRA is just starting to take notice!

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A few months ago, Dining Date Night began offering customers a 30% discount at various restaurants in Toronto.  In order to get the discount, a customer books a reservation on a website and pays a $10 fee to Dining Date Night.  When the customer visits the restaurant, 30% of the total bill (before taxes) is deducted as a discount.  This type of promotion is relatively good for both the consumer and the restaurant that provides the discount, because the restaurant can restrict the hours when reservations may be taken.

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I’ve written a couple of articles about Groupon on my sister blog, Canadian Restaurateur.  This is part of a series that will cover accounting for Groupon certificates, setting up your Point of Sale (POS) system to properly track coupons and discounts, using QuickBooks to enter Groupon transactions, examining the tax treatment of Groupon certificates (this one), and finally, determining whether your restaurant should consider Groupon.

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Many restaurant owners use their automobiles for picking up supplies for the business, researching other restaurants, and making trips related to the restaurant’s operations.  In Canada, individuals are able to claim a reasonable portion of their automobile expenses against their employment income from the business.  Even if you don’t draw a salary, you’re still considered an employee, by being a director of the company.

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If  your restaurant pools or shares tips, charges automatic gratuities, or receives a tip-out “to the house”, this article could save you thousands of dollars.

If you’re like most restaurateurs, you probably think that the Canada Revenue Agency’s only concern about tips and gratuities is that servers report them on their personal income tax returns.  While the CRA is concerned about this, now, they are even more interested in restaurants that fail to report certain types of tips.

The CRA’s policy on tips and gratuities can be found here.  The rest of this article may shock you.

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I’m certainly not saying that all, or even a significant number, of CRA’s tax auditors are corrupt, but this story in the Montreal Gazette highlights some very interesting issues surrounding restaurant tax audits.

The corrupt tax auditors seemed to focus on restaurants, knowing that they could “justify” large reassessments, unless the owners paid them bribes.  In at least one case, the auditor asked for the bribe before auditing the restaurant!  Finally, the auditors could just as easily make a restaurant appear to be reporting all of its income as it could make it look like they were evading large amounts of tax.

An RCMP investigation of Canada Revenue Agency employees has resulted in three former auditors being accused of shaking down restaurant owners for cash.

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Here are the top five qualities of a “good” restaurant accountant:Drowning in paperwork

  1. Understands your restaurant and uses this knowledge to offer strong advice for improving your operations and finances;
  2. Analyses sales, expenses and margins to identify problems and improve profitability;
  3. Provides sound tax advice to legitimately maximize your deductions and minimize your taxes;
  4. Ensures that you comply with all tax laws, and
  5. Knows how to document and prove your margins to a tax auditor.

The last point deserves a bit of an explanation.

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