The Treasury Department has decided to make cracking down on tax-exempt meals one of its administrative priorities as of July 1, 2014, with no deadline for completion. Large tech. companies like Google and Facebook are big on providing free meals to their employees. They also use their heavily stocked cafeterias as a hiring incentive for prospective employees. Since these meal expenses are 100% deductible for the employer versus a 50% deduction if the employer was to take say a business-related lunch, the IRS has decided to dig deeper as to whether they should be deducting all their employee meals. Under IRS Publication 15-B, workers are excluded from paying income or payroll taxes on meals that are provided for the convenience of the employer and furnished on the employer’s business premises. Convenience of the employer also means the employees are restricted to short meal periods (30 to 45 minutes). They can’t be expected to eat elsewhere in such a short period of time. The convenience part is what the IRS is trying to debate. They have been performing extensive employment tax audits in recent years and are looking for ways to combat tax avoidance.
They are especially targeting the west coast due to all the technology companies with campuses in California. Spokespeople from Twitter, Google, and Facebook all declined to the comment on the subject and didn’t wish to discuss how they treat the meals for tax purposes. Tax law experts from various universities believe the meals that are most at risk for changed tax treatment are the ones at either end of the workday, i.e. breakfast and dinners. Going after employee meal deductions might seem petty for smaller employers that buy occasional staff lunches, but if the tax treatment was changed, it could result in significant tax increases for large companies like the tech. giants. Feel free to read more here –
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