As summer ramps up, hospitality, lodging, and marinas enter their busiest and most profitable months. With increased guest traffic, more staff on the payroll, and new expenses on the horizon, now is the perfect time to review your tax and payroll strategies. Staying proactive now can help you avoid headaches later and maximize your bottom line.
1. Stay Ahead of Quarterly Tax Payments
One of the most important deadlines for hospitality businesses is just around the corner: the second quarter estimated tax payment is due June 15, 2025123. If you expect to owe $1,000 or more in taxes at year-end (or $500 or more for corporations), you’re generally required to make quarterly payments. Missing this deadline can result in penalties and interest, so plan ahead.
Tips for Managing Quarterly Taxes:
- Estimate Your Income: Use your current earnings and last year’s numbers as a guide. If your business is seasonal, consider annualizing your income for more accurate payments3.
- Use Safe Harbor Methods: The IRS allows you to base your payments on 100% (or 110% for higher earners) of last year’s tax liability, or 90% of your current year’s expected tax23.
- Automate Your Bookkeeping: Outsourced or automated bookkeeping services can help track your income and expenses, making it easier to calculate and meet your tax obligations1.
2. “No Tax on Tips” Act: What It Means for Hospitality Businesses
Recently, the Senate passed the No Tax on Tips Act, which would allow employees earning under $160,000 per year to deduct up to $25,000 in reported cash tips from their taxable income45. While the bill still needs to be approved by the House and signed into law, it’s a reminder of the importance of keeping accurate payroll records—especially for tipped employees.
Key Points to Remember:
- Current Law: All tips, whether cash, credit card, or electronic, must be reported as taxable income by both employees and employers5.
- Potential Changes: If the bill becomes law, it could provide significant tax relief for tipped staff, but the details are still being finalized. Stay tuned for updates as the legislation moves through Congress45.
- Best Practice: Maintain thorough records of all tips reported by your staff, regardless of how they’re received. This will help you stay compliant and ready to adapt to any new regulations.
3. Managing Payroll and Labor Costs
Payroll is often the largest single expense for hospitality businesses, sometimes accounting for over 40% of operating costs6. With summer hiring in full swing, it’s essential to manage payroll proactively to avoid surprises at the end of the month.
Strategies for Effective Payroll Management:
- Monitor Staffing Levels: Adjust your staffing based on real-time sales forecasts and guest volume. This helps you control labor costs and avoid overstaffing during slower periods6.
- Track Overtime and Tips: Ensure that all hours worked and tips received are accurately recorded and reported. This is especially important for compliance and for maximizing any new tax benefits for tipped employees56.
- Use Payroll Software: Modern payroll systems can automate calculations, tax withholdings, and reporting, reducing errors and saving time6.
4. Expense Tracking and Deductions
As you invest in guest experiences—whether it’s upgrading your marina, adding new amenities at your glamping site, or refreshing hotel rooms—keep detailed records of all business expenses. These records are essential for maximizing your deductions and simplifying tax prep at year-end.
Common Deductions for Hospitality Businesses:
- Property Upgrades and Maintenance: Costs for repairs, renovations, and new equipment.
- Staff Training and Uniforms: Expenses related to training programs and uniforms for employees.
- Marketing and Advertising: Costs for promoting your business, including digital ads, brochures, and events.
- Travel and Meals: Business-related travel and meals for staff or meetings with vendors.
Pro Tip: Use an automated expense management platform to centralize and validate expenses, flag duplicates, and streamline approvals7. This not only saves time but also ensures compliance with your company’s policies.
5. Preparing for the Rest of the Year
Summer is just the beginning of your busy season. As you look ahead, consider these steps to stay on track:
- Review Your Financials Regularly: Schedule monthly or quarterly reviews of your income, expenses, and payroll to identify trends and make adjustments as needed.
- Plan for Seasonal Fluctuations: Hospitality businesses often experience significant ups and downs in revenue. Build a cash reserve during peak months to cover expenses during slower periods.
- Consult a Tax Professional: A knowledgeable accountant can help you navigate the complexities of hospitality taxes, identify new deductions or credits, and ensure compliance with changing regulations.
Key Take-Aways
With the busy summer season underway, now is the time to focus on tax and payroll best practices for your hospitality, lodging, or marina business. Stay ahead of quarterly tax payments, keep accurate records for tipped employees, manage payroll proactively, and track all business expenses. By staying organized and informed, you’ll be well-positioned for a successful and profitable season.
If you have questions about tax planning, payroll management, or how new legislation might affect your business, reach out to our team. We’re here to help you navigate the complexities of hospitality finance and keep your business running smoothly.