Employers who currently give out free employee meals are expected to fight any changes from the IRS.
Among those Silicon Valley tech giant companies like Facebook, Google and Twitter, the daily free hot meal for employees is definitely a notable benefit.
It’s notable enough that now the Internal Revenue Service wants to tax it.
The IRS annually issues a list of priorities for the upcoming months leading to next tax season, and of the 300-plus priorities listed, the one easiest to understand is the desire to treat free employee meals as a taxable benefit.
Under IRS rules, the cost of the food would be considered income to the employee. The employer would owe its share of payroll tax on that money while the employee would owe income and payroll tax on it as well.
Every year, when surveys are done on the Best Companies to Work For, the technology-based firms from Silicon Valley are always rated highest. In the most recent survey by Glassdoor.com, which collects employee satisfaction ratings, LinkedIn took the No. 1 spot, followed by Facebook at No. 2 and Google at No. 7.
The in-house cafeterias are seen as a benefit to employee happiness. Under current tax rules, providing “occasional’’ food and beverages to employees in the form of free coffee, soda or snacks, is considered a “de minimis’’ meal and is not considered taxable.
Similarly, full meals provided to employees for the “convenience’’ of the employer (keeping employees working through meals, or for deadline-related projects) are not taxable either.
If a company is located far away from available restaurants, or if the lunch hour is the busiest time of the company’s work day, meals can be provided without taxation.
In all of the above examples, food can be deducted by the employer as a business expense.
What the IRS is considering is changing the rules on what is a “convenience\\ for the employer. Even as the IRS considers the change, note that it takes up to a year to institute the change once it is adopted.
Such a new rule can also be argued against, and it is possible the big companies who promote employee meals as a reason to work for them are considered possible opponents of the new tax.
Why is the IRS considering this move? A new tax on employers writing off employee meals and lodging (which happens when work requires overnight onsite or near-site stays) would raise about $2 billion a year, according to a recent Joint Committee on Taxation study.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.