Restaurant & Hospitality Tax & Accounting Services — Bergen County.

The FICA tip credit under IRC §45B allows food and beverage employers to claim a dollar-for-dollar federal income tax credit equal to the employer's 7.65% FICA share (Social Security + Medicare) paid on employee tips above the federal minimum wage of $7.25 per hour. It is filed on Form 8846, attached to your business return.

Most Bergen County restaurant operators have never filed Form 8846. This is not a gray area or aggressive tax position — it is a straightforward statutory credit that most restaurant owners simply don't know exists. On $300,000 in annual tips, the credit is approximately $22,950 per year. Prior years (up to 3) can be recovered through amended returns. Unused credits carry back 1 year and forward 20 years.

Note: Auto-gratuities and mandatory service charges are not qualifying tips and are excluded from the credit per Revenue Ruling 2012-18. TC Advisors calculates your exact credit during onboarding — free for new clients.

No. As of March 2026, New Jersey has not conformed to the OBBBA's "No Tax on Tips" deduction under IRC §224. The federal deduction allows W-2 employees in covered food service and hospitality roles to deduct up to $25,000 in tip income from federal taxable income for tax years 2025–2028. NJ taxes the full tip income on the NJ-1040 at NJ's graduated rates.

This creates two separate taxable income calculations for tipped employees: one for federal withholding (which can apply the §224 deduction) and one for NJ withholding (which cannot). Restaurant payroll systems must handle this correctly. TC Advisors advises on the correct withholding setup and communicates the difference to affected employees.

The NJ Legislature has not introduced conforming legislation as of March 2026. TC Advisors monitors this and will notify clients if NJ conforms in a future legislative session.

Under N.J.S.A. 54:32B and the NJ S&U-1 bulletin: prepared food for immediate consumption (restaurant meals, hot food, deli items) is taxable at 6.625%. Unprepared food sold for home preparation is generally exempt. Alcoholic beverages are always taxable.

Gratuities: Voluntary customer tips are NOT subject to NJ sales tax — they are between the customer and the employee. However, mandatory service charges or auto-gratuities added by the restaurant to the bill are subject to sales tax as part of the meal price.

Delivery charges: Taxable when the food delivered is taxable. Third-party delivery platforms (DoorDash, Grubhub, Uber Eats) operate under marketplace facilitator rules — they collect and remit NJ sales tax on their orders, but you must verify your POS and accounting properly reflect this to avoid double-counting or gaps.

NJ S-3766 begins a 5-year phase-out of New Jersey's tip credit starting in 2026. Currently, NJ allows employers to count customer tips toward the minimum wage obligation — the cash wage floor for tipped employees in 2026 is $6.05/hour, with tips making up the rest to the $15.92/hour full minimum wage. By 2030, this tip credit is eliminated entirely, and you must pay every employee at least $15.92/hour (or whatever the 2030 minimum wage is) entirely in cash wages.

The math matters now. A restaurant with 10 servers averaging 40 hours/week, currently paying $6.05/hour cash, faces an additional $200,000+ annually in labor cost by 2030 if no changes are made. Menu prices, staffing models, and operational efficiency must all be adjusted — and the earlier you start, the less disruptive the transition.

TC Advisors builds a 5-year labor cost model for every restaurant client showing the exact additional cost per year, 2026–2030, with scenario analysis for different staffing and pricing strategies.

For restaurants netting less than $50,000–$60,000 annually, an LLC taxed as a sole proprietorship or partnership is typically simpler and more flexible — particularly given the complexity of restaurant payroll. Above that threshold, an S-corp election can save meaningful self-employment taxes by splitting profit between a W-2 salary and tax-free distributions.

The restaurant-specific complexity: S-corps require you to run payroll for yourself as an owner-employee — and restaurant payroll is already complex (tipped employees, multi-rate wages, FICA reporting). The additional administrative cost of adding owner payroll to this must be weighed against the SE tax savings. TC Advisors models this before recommending the election.

One option does not exclude the other: the FICA tip credit (Form 8846) is available to both LLCs and S-corps. The NJ PTE election (which bypasses the SALT cap) works for LLCs and partnerships but not S-corps — another factor in the analysis. See our business entity comparison tool or consulting services.

A cost segregation study under IRS Rev. Proc. 87-56 reclassifies building components from the standard 39-year (commercial) or 15-year (qualified improvements) depreciation schedule into shorter-lived 5 or 7-year categories. Restaurant build-outs are particularly rich in short-lived personal property: commercial kitchen equipment, specialty restaurant lighting, decorative fixtures, flooring, countertops, POS systems, and ventilation components.

Under OBBBA's permanent 100% bonus depreciation (IRC §168(k)), every dollar of reclassified personal property can be fully expensed in Year 1. A $400,000 restaurant build-out might have $130,000–$160,000 in reclassifiable components — turning a $10,000 Year 1 deduction under standard depreciation into a $130,000+ deduction.

TC Advisors provides a free feasibility analysis before recommending any study. If we don't believe the benefit justifies the cost of the study, we'll tell you. Restaurant build-outs are among the most favorable candidates for cost segregation of any asset type.

Under N.J.S.A. 54:32D, New Jersey imposes a 5% state hotel occupancy fee on all room and accommodation rentals. Individual municipalities may add local hotel taxes on top of the state fee. Hotels, motels, B&Bs, inns, and short-term vacation rentals that charge for accommodations must register with the NJ Division of Taxation and file quarterly returns on Form ST-250.

Who must register: Any business that rents sleeping accommodations for a period of less than 90 days, for a fee. This includes traditional hotels, boutique inns, and increasingly, short-term rental operators who list on Airbnb or VRBO — though Airbnb and VRBO collect and remit the state occupancy tax directly in NJ as marketplace facilitators.

TC Advisors handles NJ hotel occupancy tax registration, quarterly ST-250 filings, and ensures the correct blended rate (state + municipal) is applied for properties in Bergen County municipalities including Fort Lee, Edgewater, Hackensack, and Paramus.

NJ sales tax applies to catering services when the caterer prepares food on-site or provides food for immediate consumption. The taxable amount includes food, non-alcoholic beverages, and labor charges that are part of the catering package — unless the labor is separately stated and genuinely separable from the food service.

If your catering invoice bundles food and service without breaking them out, the full amount is typically taxable. If you separately state "food: $X" and "event coordination/planning: $Y," the planning fee may be exempt if it is truly separate from food preparation and service. This distinction is fact-specific and frequently contested in NJ audits.

Rentals of equipment (tables, linens, chafing dishes) as part of a catering package are also subject to NJ sales tax. TC Advisors reviews your catering contract templates and invoice structure to ensure correct treatment before an audit finds the error.

The 80/20 rule (formally the "dual jobs" rule) states that an employer may only apply the NJ tip credit to hours when an employee is performing tipped work. If an employee spends more than 20% of their workweek — or more than 30 continuous minutes — performing non-tipped duties (cleaning, setup, busing their own tables, performing maintenance), you cannot apply the tip credit for that time and must pay the full NJ minimum wage in cash.

Common violations include: servers who also perform extensive side work (cleaning, restocking), bartenders who do significant setup and breakdown, and employees who float between tipped and non-tipped roles. Multi-role employees require careful scheduling and time-tracking to stay compliant.

TC Advisors reviews your scheduling practices and role definitions as part of onboarding — NJ wage and hour violations related to the 80/20 rule carry significant liability, and the documentation requirements are non-obvious for most operators.

Most restaurant and hospitality businesses have seasonal revenue — high in summer, around holidays, and during major events; lower in January–March and other slower periods. The standard quarterly estimated tax rule (pay 25% of your annual liability each quarter) ignores this seasonality and penalizes businesses for underpaying in high-revenue quarters.

The solution is the annualized income installment method under Form 2210, Schedule AI. Instead of uniform quarterly payments, this method calculates each quarterly payment based on the actual income earned through that quarter — meaning your Q1 (slow season) payment is proportionally much smaller, and you don't overpay early in the year.

TC Advisors calculates your quarterly estimated taxes using this method for every restaurant client — eliminating underpayment penalties during slow months and preventing the cash flow shock of large lump-sum payments during high-revenue quarters.

Yes — with specific conditions. Meals provided to employees during their work shift, on the employer's premises, for the employer's convenience (e.g., so the employee doesn't have to leave during a shift) are generally deductible under IRC §119. The cost is deductible as a business expense and generally excluded from the employee's income.

Post-TCJA, employer-provided meals are only 50% deductible unless they qualify as a de minimis fringe benefit or are provided for the employer's convenience and eaten on business premises. Restaurants frequently over-claim this deduction by including meals that don't meet the employer-convenience standard.

Staff meals, pre-shift tastings, and family meals all require specific documentation. TC Advisors establishes the correct meal policy, documentation requirements, and tracks these deductions in your bookkeeping system to ensure they survive IRS scrutiny.

For a new restaurant client, TC Advisors reviews: (1) prior 3 years of tax returns to identify unclaimed FICA tip credits and any missed elections; (2) your NJ sales tax returns (ST-50) to verify correct classification of taxable vs. exempt sales; (3) payroll records including tip reporting summaries and Form 8027 filings if applicable; (4) your POS system reports to reconcile sales to tax filings; and (5) any lease or build-out documentation for cost segregation feasibility.

You don't need to have all of this organized before calling. TC Advisors conducts the initial strategy session — typically 45–60 minutes — based on whatever you have, identifies the highest-value opportunities, and then requests specific records. The FICA tip credit analysis alone is done at no charge during onboarding.

Call (201) 343-1621 or book online for your complimentary strategy session.