Employee Meals with a Side of Tax

Large Companies|Tax

By Brian Burnett

For technology giants located in the heart of Silicon Valley, it has become standard practice to shower their employees with handsome perks such as on-site gyms and a seemingly unlimited supply of lavish meals.  The latter of these has caught the attention of the IRS in recent years.

Pursuant to Internal Revenue Code Section 119, meals provided by an employer are excludable from an employee’s gross income provided the meals are furnished at the employer’s place of business and are for the convenience of the employer.  At companies such as Google and Facebook, where employee perks are extravagant and seem to go beyond what this particular income exclusion was intended for, the line becomes blurred as to who is the true beneficiary of the meals.

Because the incentives are symbiotic, encouraging the employees to work longer hours and collaborate in a more casual work setting, while simultaneously providing employees with free, gourmet meals, the Section 119 applicability becomes muddied, sparking the IRS to take a closer look at the Code.  The IRS has added Section 119 to the 2015–2016 Priority Guidance Plan, with the intent to dissect the Code Section further and determine if changes are necessary.

A change to the taxation of employee meals might not only affect large tech giants, but might rather have a ubiquitous impact across the spectrum of taxpayers.  If amendments are made to Section 119, it could have detrimental consequences to both the employer and the employee, possibly requiring that the employer-provided meals must be included in an employee’s gross wages and spurring the employer to pay more in employment taxes.

Contact us if you have questions on changes to IRS Section 119 and visit our Tax Services page to learn more about the services that we offer our clients

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.