4Thought Blog

While the two biggest benefits for McDonald’s Owner/Operators in the second federal stimulus were changes to PPP loans and the expansion of Employee Retention Tax Credit, there are some other benefits franchisees should consider, as well.

Both the Work Opportunity Tax Credit and Empowerment Zones have been around for some time but the second stimulus – formally known as 2021 Consolidated Appropriations Act – extends both of them for five years, providing a long window for tax planning opportunities.

Here are the details you’ll need to consider for these opportunities:

With the 2020 election in the rearview mirror, businesses are looking forward to beginning 2021 with more clarity. Restaurants are particularly keen to understand what new legislative measures have passed or are on the horizon as they continue to navigate the acute—and devastating—impact of the coronavirus on the industry.

Of most interest is the fate of the Real Economic Support That Acknowledges Unique Restaurant Assistance Needed To Survive (RESTAURANTS) Act, passed by the House of Representatives in October.

If passed by the Senate, the act would provide to non-publicly traded restaurants $120 billion of relief through a grant (rather than a loan that is provided under the Paycheck Protection Program) that would cover the difference between 2019 and 2020 revenues. Restaurants would be able to use the funds for any expenses deemed essential by the secretary of the Treasury Department.

As we are discussing during our year-end tax planning meetings with all of our McDonald’s clients, President-Elect Joe Biden has expressed support for major changes to federal income tax laws, including both businesses and individuals, which would affect McDonald’s Owner/Operators.

With control of the Senate still up in the air, it’s unknown which of his plans may come to fruition, but it’s still wise to learn about his plans, especially as you start working on year-end tax planning. For a more detailed explanation of the changes supported by Biden, refer to our previous article found here.

We’ve studied his tax plans and have run some examples of what Biden’s tax plans could potentially cost a McDonald’s franchisee if they became law. Learn how you might be impacted in our example below.

A heads-up to McDonald’s franchisees: DoorDash plans to remit state sales tax on the delivery orders in 19 new states starting Sept. 1, 2020.

The 19 affected states are: Arkansas, Connecticut, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Maine, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Rhode Island, South Carolina, South Dakota, West Virginia and Wyoming. DoorDash already remits state sales tax in Pennsylvania and Washington state.

As you reach the end of your covered period for your Paycheck Protection Program loan – if going with the 8-week option – here are some tips for getting ready for the forgiveness application process.

You may have seen our recent article about the new EZ forgiveness application. Eligibility for that application is a matter of interpretation.

Whether you can or can’t use that application will depend on your ability to and comfort with certifying to the SBA that you have not been able to operate at the same level of business activity during your covered period as you did prior to Feb. 15, 2020. Your records, both financial and otherwise, would need to show that your business activity was impacted due to government mandates related to COVID.

Restaurateurs should pay close attention to their monthly reports from third-party delivery services to see if the delivery services are remitting state sales tax on the delivery orders on their behalf.

Uber Eats started remitting state sales taxes last year and now remits state sales tax in 32 states. You can view the entire list here to see if your state is included.

DoorDash recently started remitting state sales tax in Pennsylvania and Washington state, and Grubhub has started in a few states, as well.

Tax reform changed the rules on business meals and entertainment.

Here’s a reminder of what McDonald’s Owner/Operators should know about the current tax laws regarding employee meals, business meals and entertainment expenses and how best to track them.

Hardworking employees are to be treasured and valued for the contributions they make to your restaurants, but unfortunately as any experienced restaurant owner knows, not every employee is earnest.

Employee fraud is regrettably commonplace in many businesses. Near our office in St. Petersburg, Fla., there was a recent case involving a Dunkin’ doughnut shop manager who created a fake or “ghost” employee and collected and cashed their paychecks.

Ghost employees are a real problem for many businesses with a lot of employee turnover, like McDonald’s and other quick-service restaurants. It’s among the most common types of payroll fraud, according to the Association of Certified Fraud Examiners.

Through the second quarter of 2019, the restaurant industry continued to demonstrate solid performance, weathering shifting dining habits, increasing labor costs and continually fluctuating commodity prices. Same-store sales rose a healthy 1.8% across the industry, thanks in part to strong consumer spending in restaurants.

But savvy restaurants didn’t rely solely on strong consumer spending – they continued to implement strategies which demonstrated a positive impact in 2018 and early 2019. Whether through limited time offers (LTOs), a strengthened digital presence, in-house delivery capabilities or menu price increases, restaurants are recognizing that a tailored approach to drawing in customers is the key to withstanding industry challenges.

The largest tax change in a generation was made almost two years ago, but it’s still big news for small businesses. In fact, final regulations are still being written. As we prepare to head into fall, this is a good time to think strategically about your tax situation.

This article will highlight a couple of key business tax changes for McDonald’s franchisees, specifically depreciation changes and something new called the qualified business income deduction.