Article by Kevin Sweeney on “COVID-19-Related Government Budget Deficits May Spur Aggressive Payroll and Sales Tax Audits”
In an article published on August 10, 2020 in Modern Restaurant Management, Kevin Sweeney discusses that given the budget deficits faced by federal and state governments due to the COVID-19 pandemic, taxing authorities are likely to begin encountering increased pressure to collect more revenue. Consequently, restaurants can expect more aggressive payroll and sales tax enforcement in the near future.
“Payroll and sales tax are trust fund taxes,” explains Sweeney. “Trust fund taxes require business like restaurants to collect or withhold certain funds on behalf of a state or federal government and then report and pay these amounts over.”
Sweeney mentioned that in times of economic struggle, it is not uncommon for restaurants to lose track of the collected or withheld trust funds or, in more egregious cases, consciously decide to use them to pay other expenses. “When these things occur, restaurants subject themselves to significant financial and punitive exposure,” said Sweeney.
It is important for restaurant owners to ensure that funds collected or withheld are used for authorized purposes. A good practice is to put these funds in a separate account and work with your accountant or tax attorney to discuss what is best for your business.
To view the full article, click here.