Friday, September 5, 2014

IRS wants your lunch money?

The IRS can't seem to leave anything alone as it is now looking at employer-provided meals.  Yup, boss pays for your lunch or provides a cafeteria? That might be considered to be income.  The Wall Street Journal reported:


Staffers at technology companies such as Google Inc., GOOGL +0.61% Facebook Inc. FB -0.09% and Twitter Inc. TWTR +1.84% long have enjoyed free gourmet meals, courtesy of their employers. The groaning buffets, in-house pizza joints, and kitchens stocked with organic produce are an intrinsic part of the culture in much of Silicon Valley, encouraging both collaboration and longer work hours.

The IRS, arguing that these freebies are a taxable fringe benefit, has given new attention to the issue in recent months during routine audits of some companies, tax lawyers said. When employers haven't been withholding taxes related to the meals, the IRS increasingly has sought back taxes that can amount to 30% of the meals' fair-market value, the lawyers said.

In another sign of a new focus on the issue, the IRS and U.S. Treasury Department last week included taxation of "employer-provided meals" in their annual list of top tax priorities for the fiscal year ending next June. The agencies said they intend to issue new "guidance" on the matter, but gave no specifics about timing or what the guidance would say.

"I suspect this is going to be guidance on these free cafeterias, that the benefit has got to be included in income," said Anne G. Batter, an employment-tax attorney at Baker & McKenzie in Washington.

An IRS spokesman declined to comment.....

But allowing free meals to go untaxed, critics say, distorts the economy and gives some employers an unfair edge.

In theory, individual employees could be dunned for back taxes on the free meals. In practice, the IRS generally tries to collect from employers, who are liable for failing to withhold taxes on any taxable income....Rest of article

16 comments:

Anonymous said...

This is not news. The only way a meal is not income, is if the employee is on an overnight business trip, then the meal is a business expense.

Anonymous said...

Read about this, IRS is going to get it's money. Unfortunately, it is our money.

Anonymous said...

What 7:37 said. This has been in the tax code for years. A fancy lunch is obviously something of value.

Anonymous said...

I'd rather the IRS go after the real perks...apartments, houses, cars, boats and planes " owned" by the businesses that are often depreciated and " gifted" to the CEOs

Anonymous said...

My employer provides a daily buffet but there is no record of who eats there each day and who does not. How will the IRS decide how much tax each employee owes? Are we currently paying income tax on the employer's contribution to health insurance?

Anonymous said...

Thanks to @7:37 and @8:05 for self-identifying as Tax Retards. Gentle readers, please get your tax guidance on this issue from IRS Publication 15-B and not from @7:37 or @8:05. That is all.

Anonymous said...

How will the IRS decide how much tax each employee owes?

IRS agent hiding under the meat loaf....taking names.

Anonymous said...

It doesn't have to be an overnight trip if you take a customer/client to a business lunch, and discuss business.

Anonymous said...

Charge 10 cents for the meal. End of problem.

Anonymous said...

See tax topics, topic 511. Thanks to 8:43 for joining the RETARD list. That is all.

Unknown said...

I don't understand. If the money isn't freely spendable--if I can't exchange the opportunity to take the lunch offered for the option of taking lunch elsewhere with no difference in net cash--how is it taxable other than through sales tax which would have already been paid before the lunch was put on the table?

Anonymous said...

It is hard to see how this would work in practice. Some people just need to get away from the office at lunch to clear their head. Maybe they have a no smoking office and they want to go where they can smoke. In any event, given a large enough sample size of employees there will be some who never or almost never eat the free lunch. I guess the company could keep a record every day of who eats free lunch so they could put it on their income tax statement. But the company is already paying for the food, providing a place to eat, etc. If they have to start counting heads and withholding tax on folks I believe most companies would either drop the free lunch, or if it is a very large company with a large campus and large cafeteria they could start charging the employees to eat. Of course you would have to charge the fair market value of the meals. Then the IRS would have nothing to say about it.
The one I am waiting for is the crackdown in independent contractors. Because of Obomacare many companies are hiring as many independent contractors as possible. Problem is the IRS defined independent contractor many years ago. They have about 20 questions to determine who is and isn't. I believe the vast majority of independent contractors would not pass the IRS test and would be deemed employees. When that happens a bunch of folks will owe a ton of money.

Anonymous said...

Derek if two people make $300 a week, and one gets free lunch and the other has to spend a minimum of $50 a week to eat lunch, the first person, is receiving $350 in real income. The one paying $50 pays tax on his purchase while the lunch is a business expense for the corporation and no tax is paid.
Everybody had to pay for the food purchase and pay the cook.

Also, the corporation can say, I'll pay you less because you get free lunch. Maybe you have a big breakfast and don't like free lunch or like the cafeteria.

It's gaming the system.


Pittpanther said...

To 11:39am, what will have to happen is that companies that offer free food will have to ask their employees to sign up for it. Similar to health insurance.
If you sign up, you get taxed regardless if you eat or not, or how often you eat there. If you don't sign up, you don't get to eat there at all.

Anonymous said...

And to think, we, the people, had a chance to do away with the I.R.S. a few years ago. Remember Mick Huckabee said that would be his first order of business if elected president.

I Demand This And That said...

If someone is making $300 a week, he doesn't need to be eating an employer provided lunch. He needs to spend his lunch hour finding another job.

And what about those employer provided pencils, coffee and toilet paper? And parking lots and personal use of the phones and computer. If I don't drink coffee but have to pay at the Coke machine, isn't the coffee drinker actually realizing a company benefit that's discriminatory. And hot sauce at the break room table....everybody knows only black employees use it. Ima call the EEOC.


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