August 2001

Expert Speaks on Tax Credits and Compliance

Processing payroll is particularly taxing on the hospitality industry, requiring businesses to take heed of regulations that are subject to change every year, according to a restaurant payroll expert who spoke at a recent New York State Society of CPAs meeting.

“It can be said that restaurateurs have targets on their backs,” said Michael Busch, president of Payroll Computing Services, during a regular meeting of the NYSSCPA Hospitality Industry Committee.

“If you believe this to be true, it is imperative that everything is done properly with regards to payroll,” Busch said, drawing on his 14 years of experience as a certified payroll professional to offer advice that could alleviate the pressures that vigilant labor auditors, changing laws, and a rising minimum wage place on the industry.

“Only restaurateurs have employees come up to them and say they want to take home a certain amount of money each week,” he said. “Only restaurateurs have to deal with ‘zero’ checks,… tip audits, and complex overtime calculations.”

According to Busch, hospitality professionals must be diligent about paying the proper uniform maintenance allowance and overtime for tipped employees and running payroll with the proper frequency, because these are the “hot topics that labor auditors focus in on.”

Meanwhile, managers should use available tax credits to offset the rising cost of labor.

“Payroll is normally considered a necessary evil,” he said. “One way to minimize the expense is by deducting meal credits.”

New York state currently allows a meal credit of $1.65 for a tipped employee and $1.75 for a nontipped employee, Busch said. These credits can be deducted from gross wages before taxes are calculated, thus increasing the benefit by including employer-matching FICA taxes. “This is extremely beneficial to offset the minimum wage increases, which seem to get passed every few years,” he said.