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IRS looking into meals provided by employers routinely

On Behalf of | Sep 12, 2014 | Corporate Taxes |

One of the first things that is often brought up when working at Google is discussed is the free meals it provides its employees. In addition to being a tactic to pull in prospective workers, it also makes it easier for employees to work longer hours since they do not need to leave the premises for meals.

The Internal Revenue Service is looking into the practice to determine whether the meals businesses provide employees, are taxable. Currently the workers who take advantage of this benefit are not required to pay payroll or income tax on the food. This is a fairly common practice at technology companies located in the state of California.

Though it is unclear what conclusion the IRS will reach, there are a couple of factors that could determine how a business is classified. The first is the food that is actually being provided to the workers. There are provisions in the tax code that exclude doughnuts, coffee or soft drinks. Another is whether employees of a business can find other placed to obtain meals within a period of time deemed to be reasonable.

Should the IRS decide that certain meals are taxable, businesses will have to determine how to respond. One option may be to allow workers to purchase the meals at cost and then provide them taxable raises. 

This is just one of many tax concerns that could exist between the IRS and a business that would require guidance from a lawyer to work through.

The matter was included by the Treasury Department on its list of administrative priorities. The timing of its completion as not provided.

Source: Carrier Management, “No Such Thing as Free Lunch; IRS Eyes Rule Changes,” Richard Rubin, Sept. 7, 2014


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