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Date Created: 12/18/15
Restaurant Smallwares are Deductible in the Year They are Purchased As a Phoenix CPA firm and Phoenix tax preparers we have observed that many of our new restaurateur clients are not getting the tax benefits from restaurant smallwares. Great news! Back in 2002, the IRS established a new IRS procedure allowing restaurant and tavern owners to change accounting methods and expense the cost of replacement dishware, glassware and other items that previously had to be depreciated. Unfortunately, may restaurateurs are paying more income tax than they should because of capitalizing instead of expensing smallwares. The smallwares method of accounting allows restaurants and taverns to deduct the cost of these replacement items in the year purchased. It does not matter whether the restaurant is filing on an accrual or a cash method for taxes. Financial Statement GAAP rules are different than tax purposes. The smallwares have to be capitalized. Generally smallwares consists of the following categories: glassware, flatware, dinnerware, pots and pans, table top items, bar supplies, food preparation utensils and tools, storage supplies, service items and small appliances costing $500 or less. The smallwares accounting method can only be used by persons engaged in the business of operating a restaurant or tavern that prepares food and beverages. It isn't available for new business start-up purchases of smallwares and does not apply to items purchased and stored at a warehouse or location other than the restaurant or tavern where the items are used. Under the new procedure 2002–12 Restaurant small wares should not be capitalized as inventory unless stored at off-site facility. Audit Protection. If a taxpayer complies with the requirements of this revenue procedure and changes its method of accounting for the cost of smallwares to the smallwares method provided in section 5 of this revenue procedure, the treatment of those costs will not be raised as an issue in any taxable year before the year of change and, if the treatment of the cost of smallwares has already been raised as an issue in a taxable year before the year of change, that issue will not be further pursued. So what does the IRS consider as Smallwares? For purposes of this revenue procedure, smallwares consist of the following ten categories of items: Glassware and paper or plastic cups Flatware (silverware) and plastic utensils Dinnerware (dishes) and paper or plastic plates Pots and Pans Table Top Items Bar Supplies Food Preparation Utensils and Tools Storage Supplies Service Items SmallAppliances that cost $500 or less. Categories 5 through 10 include, but are not limited to, the items listed below: Table Top Items include items placed on customer tables, such as salt and pepper shakers, cheese shakers, ash trays, teapots, cruets, sugar caddies, tablecloths, napkins, menu holders, menus, vases, candles, and candleholders. Bar Supplies include mixing glasses, bar strainers, cutting boards, liquor pourers, jiggers, corkscrews, bottle openers, storage bottles, wine and champagne stoppers, bar caddies, wine coolers, decanters, salt and sugar glass rimmers, slow pourers, and malt shakers. Food Preparation Utensils and Tools include hand utensils (spoons, spatulas, wisks, peelers, etc.), pastry and grill brushes, skimmers, knives, kitchen shears, cutting boards, strainers, colanders, shakers, dippers, measuring cups and spoons, thermometers, gloves, goggles, timers, scales, shaker baskets, salad spinners, lettuce crispers, sifters, pastry bags and tubes, mixing bowls, pot holders, kitchen towels, cheesecloths, and kitchen staff uniforms. Storage Supplies include food containers, flatware sorters, dish containers, and spice racks. Service Items include pepper mills, cheese graters, bread boards, pitchers, squeeze dispensers, coffee pots, napkin receptacles, flatware, plate, glass, and mug storage racks, wait staff and self-serve trays, soup and salad bar trays and containers, bus tubs, tray carts, booster seats, and wait staff uniforms. SmallAppliances include iced tea dispensers, can openers, condiment pumps, individual food warmers, heat lamps, slicers, glass washers, electric knife sharpeners, blenders, juicers, and nonindustrial mixers. Small appliances do not include appliances that cost in excess of $500. To Know MoreAbout Tax Savings Tips : Kindly Visit @ http://jeffbrookscpa.com
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