I’ll bet you won’t be surprised when I say I send articles to my friends and family. But, you may be surprised to know I send them several times a day. Of course, I am positive it’s information they ABSOLUTELY have to know and have. Well, I did that again last week. But, this time I only sent it to my son, because I knew it could be very important to him.
What was it? The IRS (Internal Revenue Service) is determining if it should be taxing the
“free” meals that companies provide for their employees.
Now, our firm routinely offers dinner or lunch for our employees. OK, maybe not so routine, but at least four or five times a year, when we have meetings that they MUST attend. And, I don’t think those are the targets at which the IRS is aiming.
No, the IRS is aiming at those wonderful cafeterias with gourmet meals, grandiose snacks, etc. that companies like Google, Facebook and Twitter provide their staff. These companies claim they offer the meals to encourage collaboration, working through meals, or even staying late. (It’s that latter reason that may cause my son’s benefits to be curtailed.)
Right now, the companies get to deduct at least 50%- if not 100%- of the cost of providing the food services. (“What?”, you say. You thought that meals were always deductible at ONLY 50%. Well, not when the meals are for employees only and have a specific business purpose involved.)
Right now, the IRS is considering these meals to be compensation to the employees. Which means the value of the meals must be included on their W-2’s. And, they may not just be subject to income tax- but social security and Medicare assessments, as well.
The IRS would naturally consider these taxable fringe benefits. (Meals served at the convenience of the employer are expected to be at remote locations- not in the offices where everyone already works.) After all, the IRS has already decided to tax employer-provided life insurance (value over $ 50K), automobiles, and the like.
The IRS could go after each employee, but may settle for collecting from employers, since they failed to collect the appropriate withheld taxes.
Of course, industry won’t take this new interpretation without a fight. You can bet someone will be taking this matter up- in the courts.
I have always known it: there is no such thing as a free meal. I wonder what’s next?
Muriel recently posted..How To Date A French Man
I am not sure it WILL go away, Muriel… But, I am pretty certain there will be some adjustment to the taxable nature of this benefit. (I am guessing it will drop from 100% deductible to 50%- or maybe subject to social security and Medicare- as a way of extending the funding of these programs.)
Thanks for the comment!
This sounds totally ridiculous and foreign to me…but then again I don’t know anywhere in Oz-land that has work provided cafeteria’s…hmmm
Janine recently posted..My Unconventional Learnings from 4 Years of Blogging
Actually, Janine, there are a few of them in Australia, of which I am aware..
But, they don’t get the tax benefits that those operating in the States currently obtain.