Can A Chef Have Expenses On Their Tax Return in Wilmington NC
As a professional chef, your career can quickly take you to various locations across the country or around the world. This is not only expensive, but it also requires significant spending money to be prepared for any situation.
Running into financial troubles due to an unexpected expense is totally normal — even expected in this industry!
But before you dive into debt to pay for food and travel, make sure you’re covered! It's important to understand what kind of expenses are considered “professional” so that you don't have to file additional taxes for them.
In fact, some employers may offer limited tax benefits if you determine that these costs are not related to your job. Luckily, we've gathered all the information you need to know about whether or not a chef has incurred deductible business expenses in the past.
They must keep records of their expenses
As a professional chef, you are required to have extensive amounts of supplies and equipment. You will need to maintain receipts for these items, as well as any food or beverages that you spend money buying for your restaurant.
Most people think that because they enjoy eating at your restaurant enough to make it a frequent visit, then you don’t really have to worry about paying taxes on what you eat. But unfortunately, this isn’t always the case.
Whether you're an amateur or expert cook, keeping tabs on all your spending can feel like a full time job. It is important to be able to prove how much you spent on your culinary adventures if you want to show the tax man that you've got a good handle on your finances.
Chefs know that staying within budget is just part of being successful in the industry. Having to account for every little thing you buy makes it even more difficult to do so! Luckily for you, we have gathered some helpful information for you here. Read on to learn everything you needed to know about having legal expenses on your income tax return.
What are deductible business expenses?
Deductible business expenses include costs suchas rent, utilities, employee wages, and marketing materials. The IRS allows businesses to deduct these costs from their taxable incomes.
They must itemize their expenses to be able to claim certain expenses
As a professional chef, there are many things you will need to have on hand at all times. You will probably require several sets of dishes and cookware, good quality knives, pots and pans, recipes, tips and tricks for in-the-kitchen lessons or tutorials, and of course, food!
Most importantly, you will need to know how to prepare and make sure that your clients know how to prepare everything they order from you! This is especially important if you run a restaurant, as well as being an expert in culinary skills yourself.
Because chefs work close to home, most find it easy to accommodate their daily lives without too much trouble. However, when the day comes where you can’t get into work due to unexpected circumstances, you will need to know what to do.
It's very possible that no one may be willing to eat out because everyone knows, which could severely hurt your business. Even more so if you don't take phone calls while cooking and answering questions about ingredients and recipes!
Luckily, there are ways to organize your life such that these types of situations never arise. One way to do this is to see if you can afford to live beyond your means. If you realize that you can, then start investing in the foods, equipment, and lifestyle supplies that match that income.
Some of the expenses that can be claimed include: tips, clothing, entertainment, and transportation
As mentioned before, any item to help you in your job is allowed as an expense. These are typically categorized as business related or not business related.
Some examples of non-business related expenses include: buying coffee for work, going out for lunch every day, and traveling for personal trips. The IRS does require proof of these expenses, but it’s easier said than done since they don’t specify what types of documents satisfy this requirement.
Business related expenses are ones such as meal coupons, conference registration fees, and travel costs for meetings. All of these items must have been paid for with company money and filed with our bookkeeper, but no receipts are required.
It’s important to remember that if you are claiming too much relative to your income level, then you may need to consider lowering your exemptions. You can always visit Internal Revenue Service (IRS) websites like taxtools.org for more information.
Keep your receipts and use your best memory to recount your expenses
Like most other professionals, being a chef means you are going to be spending money! And while some of these expenditures qualify as business related (for example, if you run a restaurant), many do not.
Most common types of non-business related food and drink purchases include: groceries, laundry, dry cleaning, gas, and entertainment. It is very easy to forget about all but the last one because it happens so frequently, but none of them should be omitted when looking at your tax return.
If you find that your taxable income seems high due to such items, consider reducing the amount of food, drinks, and entertainment you purchase for yourself. Or better yet, try eating only what is spent or donated by friends or family.
This will help you reduce your overall taxable income which in turn reduces how much money you pay in taxes.
You may be able to get some tax credits
A lot of people seem to think that being a chef means eating expensive food all the time, with lots of fancy decorations and equipment. People assume that when you run into extra money at the end of the month, you’re buying nice dinners for yourself or giving a gift to your colleagues, friends or family members.
But this isn’t always the case!
A part-time chef is definitely not an employee who gets paid monthly, so a new expense policy doesn’t apply here. In fact, chefs are often (and should be) spending more money than they earn due to the nature of their jobs.
Most employers don’t provide adequate insurance coverage, which can mean significant medical costs later on. Many also don’t offer any benefits like health care or retirement accounts, making it hard to stay in touch with relatives back home.
These things cost money! And as we know, most people outside the rich have limited resources they can call upon for help.
That’s why it’s important to recognize when something is really justifiable an expense and not include it in your budget.
By having limitations on how much money you spend per week, lunch break, or even per day, you’ll probably realize that many of these unnecessary expenditures aren’t worth the amount saved.
Talk to your tax preparation service in Wilmington NC
It depends what kind of business you run as a chef, whether it is for profit or not, how profitable it is, and if you itemize or not, dependent on where you live.
If you are in the very low income bracket, then you probably do not have to worry about paying taxes on all of your food expenses. But as incomes rise, so does the amount of taxation needed.
That is why it is important to talk to an expert before figuring out whether or not you need to report certain costs when filing your taxes. An experienced tax professional can help you determine whether you have too much or too little reported income that makes you qualify as rich or poor, and therefore require different levels of taxing.
There are many ways some chefs manage their money to avoid having large taxable income. Some use vouchers and/or coupons to eat at restaurants they usually would never spend money elsewhere, while other chefs simply refuse to accept tips.
Time it takes to keep records
It is very easy for professional chefs to forget about their tax return when they are in high demand. As such, many spend hours tracking down receipts and doing their taxes at a later date.
If you’re one of these people then you should try and do it as soon as possible! The best time to tackle your tax returns will be after the New Year when things have slowed down a bit.
Tax season comes around once a year so why not take advantage of that and get yourself some extra time? If you start keeping good records now then you won’t need to worry too much come next April or June.
Potential risks of claiming certain expenses
There are some very common reasons why most professional chefs do not claim their full cost of meals as a business expense. They may not want to reveal this information due to fear of being scrutinized or even questioned about it!
If you are in this situation, you should be aware that there is an exception to the rule for employers who ask you to work outside of normal hours, or even during times when the restaurant is closed. In these cases, you can add the costs of your meal along with the wages you earn from working outside the restaurant so that they include enough tax breaks.
For example, if your employer requires you to work late nights every week then you would have to treat those night shifts like any other part of your job. You would need to include the cost of your dinner in your income and also include the appropriate taxes since it’s considered earnings.