Sarasota Restaurant and Bar Owners: Why the IRS Targets Your Industry

If you own a restaurant or bar in Sarasota, you are operating in one of the most heavily audited industries in America. The IRS knows that cash-heavy businesses have the means and opportunity to underreport income. They have developed specific audit techniques just for your industry.

How the IRS Audits Restaurants

The IRS uses several methods. Bank deposit analysis compares your reported income to your total bank deposits. The markup method compares your cost of goods to expected revenue based on industry markup percentages. They may also use the point-of-sale records to reconstruct your actual sales.

If you run a bar, they might count your liquor purchases and calculate expected revenue based on standard pour sizes and drink prices. If the math does not add up, you have a problem.

Payroll Issues

Tip reporting is another audit trigger. If your employees report tips below 8% of gross receipts, the IRS takes notice. Allocated tips and Form 8027 filings create a paper trail. Misclassifying employees as independent contractors is equally dangerous.

Protecting Yourself

Keep meticulous records. Use a modern POS system. Deposit all cash receipts. Reconcile sales to bank deposits monthly. Report all income, including cash. The cost of proper bookkeeping is a fraction of the cost of an IRS audit. If you are already facing an audit, get representation immediately. Do not walk into an IRS interview alone.