Published Date: 09/15/2014
By Reneé Watkins
High tech companies in Silicon Valley including Google, are known as innovative trailblazers when it comes to providing special perks to their employees. Company-sponsored benefits like gym memberships and free meals at a corporate cafeteria are now expected by candidates applying for job openings as part of their hiring packages. This trend is reaching beyond Silicon Valley and has candidates across the nation seeking employers who offer these generous benefits.
According to a Wall Street Journal report, however, these perks are garnering the attention of the Internal Revenue Service. In fact, the IRS may be targeting the “employer provided meals” as early as 2015. Free meals would be considered a taxable fringe benefit, the same way a company car or company-provided mobile phone is today.
Imagine if an employee consumes two $10 meals per day, five days per week, 50 weeks per year (assuming two weeks off for vacation). This amounts to approximately $5,000 in free meals per year, which the IRS could consider as taxable income.
Consider also how difficult this would be to track on an employee-by-employee basis. So, the IRS is looking to collect taxes from the employer for this benefit, based on how much of the benefit cost the employer absorbs in a given year across its workforce. This is a very interesting way to look at it, and may cause employers to reconsider some of these perks going forward. A final decision on this has yet to be made, so it will be interesting to watch and see what happens.
Currently, the tax code looks at employer-provided meals in one of two ways: If meals are considered a normal payment in exchange for labor, they are considered taxable. If they are a necessary expense for an employee to do their job (e.g., an oil worker in the Gulf of Mexico on an oil rig), they are not considered taxable.
[Note: CAI recommends that members consult with their accountant or tax attorney regarding this issue.]