New York: Restaurant Labor Laws Cheat Sheet

Many servers have personal rules for reporting their tips during tax season. Some use the “10% rule” in that they only claim 10% of their gratuities as income on their personal tax return. Some don’t view their tips as taxable income at all – and in some ways, you may not blame them. If you’ve worked in the restaurant industry, you know it can be difficult to earn a living wage and understand the inner conflict that arises every year during tax season. You’ll also need to withhold a portion of your employees’ wages to ensure they are paying the appropriate amount of tax. Most locations are governed by withholding formulas based on how much money each employee makes.

• A business that’s set up as a partnership doesn’t file an income tax return as an entity.
• Living in New York City adds more of a strain on your paycheck than living in the rest of the state, as the Big Apple imposes its own local income tax on top of the state one.
• If you are considering using a mortgage to purchase or refinance a property in New York, our New York mortgage guide can provide useful information about rates and getting a mortgage in the state.
• How much you pay in federal income taxes depends on several factors like your marital status, salary and whether or not you have additional taxes withheld from your paycheck.
• Once a payroll schedule has been chosen, set up direct deposits into your employees’ bank accounts.

When you start a job in the Empire State, you have to fill out a Form W-4. Your new employer will use the information you provide on this form to determine how much to withhold from your paycheck in federal income taxes. How much you pay in federal income taxes depends on several factors like your marital status, salary and whether or not you have additional taxes withheld from your paycheck.

Corporation

Here’s where you can find all the information you need to withhold payroll taxes in certain locations. A business that’s set up as a partnership doesn’t file an income tax return as an entity. Similar to a sole proprietorship, each partner includes a share of the partnership income (or loss) on their personal income tax return, and they file Form T5013, Statement of Partnership Income. You’ll need to mail two copies of the T5013, Statement of Partnership Income to the last known address of each partner.

One option that you have is to ask your employer to withhold an additional dollar amount from your paychecks. For example, you can have an extra $25 in taxes taken out of each paycheck by writing that amount on the corresponding line of your W-4. This paycheck calculator will help you determine how much your additional withholding should be. Another important factor in your restaurant payroll costs is payroll tax.

New York Split Shift Pay

Taxpayers in New York City have to pay local income taxes in addition to state taxes. Like the state’s tax system, NYC’s local tax rates are progressive and based on income level and filing status. There are four tax brackets starting at 3.078% on taxable income payroll for restaurants up to $12,000 for single filers and married people filing separately. The top rate for individual taxpayers is 3.876% on income over $50,000. The rates are the same for couples filing jointly and heads of households, but the income levels are different.

Sole proprietors need to pay what’s called “estimated taxes”; as a restaurant owner, you will need to make estimated tax payments, as you can expect to owe $1,000 or more in taxes of when your return is filed. While restaurant taxes may seem like a daunting subject, we’re here to put your anxiety to rest and tell you exactly what you need to know about taxes as a business owner. If you find yourself always paying a big tax bill in April, take a look at your W-4.

Everything you need to run your restaurant, all on one platform.

Residents pay 16.75% of their net state tax, while non-residents pay 0.5% of wages. Processing restaurant payroll is not just a matter of how employees are paid, but also when they are paid, which involves setting up a payment schedule. For front-of-house staff who are serving customers, it’s all about the tips. Tips are the real bread and butter for servers, not the wages that are paid and taxed and reported to the government. For restaurants that sell what’s considered “general merchandise”, the sales tax rate is 6.25%.

That’s where a restaurant scheduling and staff management software can come in handy. RestoHub tells you everything you need to know to open a restaurant. Having a strong restaurant culture reduces staff turnover and boosts restaurant sales. Give your restaurant the team management tools they need to be successful. Restaurants in New York are also required to display the state Minimum Wage Poster– in addition to the restaurant-specific Deductions From Wages Poster and Gratuities Poster–in their restaurant.

A payroll bank account

In other words, if you want to save time on bookkeeping and keep your payroll costs in check, restaurant payroll software is your best bet. Overtime pay in New York is 1.5x the employee’s normal hourly wage and required for all hours worked in excess of 40 hours. Employees cannot waive this right, so offering employees extra shifts if they accept their normal rate of pay won’t save you from those back pay lawsuits. These include FICA tax, which covers social security and Medicare, and FUTA tax which covers unemployment insurance. According to the IRS, the current FICA tax rate is 15.3% of the employee’s gross pay, of which the employer and employee each pay 7.65%. The current FUTA tax rate is 6% of the first $7,000 of wages, although many businesses qualify for state tax credits that bring it down to only 0.6%.

In 2018, for example, the multiple-location Pret a Manger was forced to pay $875,000 in unpaid wages and overtime pay. CPP and EI are not deducted from direct tips through payroll, but an employee can choose to make CPP contributions on tip income by filling out form CPT20. Direct tips are declared on line 104 on their personal tax returns. As a new business owner, you should be aware of the sales tax rates in your city, state, and/or province.

New York Paycheck Calculator

New York State does not require restaurants to offer employees paid or unpaid sick time, though businesses are still bound by the Family and Medical Leave Act, which typically applies for more serious health issues. Additionally, you may not require employees to pay for or maintain required uniforms. However, you can require them to pay for and maintain clothes in a dress code. For example, you can save money on uniform costs by asking waiters to wear a white button-up shirt with a tie rather than a custom-made shirt and tie with your logo on them. Note that the CRA expects all tips to be reported as an exact number, not an estimate.

Split shifts are allowed in New York restaurants – but there’s a catch. If the time between an employee’s start and end to the workday exceeds 10 hours, that employee is entitled to spread-of-hours pay, which requires one additional hour of minimum wage be paid for the day. Before we discuss the payroll taxes you withhold from your employees’ paychecks, we’ll cover the charges you need to pay to cover your staff’s Social Security, Medicare, and Federal Unemployment taxes.