Internal Revenue Service

Pizza Restaurant: Irs Audit Techniques Guide Internal Revenue Service

A project was conducted by the Providence District on the pizza industry. Because pizza restaurants are basically cash businesses, the potential for skimming exists. The type of entities discussed in this guide are the family owned mom and pop types of establish- ments. The "chain" or "franchise" types of pizza parlors are not addressed in this guide due to the nature of their operations, that is, the close control maintained by the franchise of these establishments does not lend itself to the approaches discussed in this guide. Overall, documentation of income and expenses in this industry has been found to be lacking. In most instances, the cash register tapes are not retained and income is not deposited intact. There is generally little or no documentation to verify the gross receipts reported on the tax return. Purchases are often paid in cash and the purchase invoices are not kept. Employees are often paid in cash, sometimes, in order to avoid the payroll taxes.