IRS Turning Its Baleful Gaze At Company Cafeterias That Churn Out Free Food
Do you hear that noise? It’s thousands of forks clattering in the hands of Silicon Valley employees currently enjoying a free lunch. The Internal Revenue Service is taking a closer look at the trend of company cafeterias shoveling free food onto employees’ plates, saying that smorgasbord is a taxable fringe benefit.
Free food is a no-brainer for companies like Google, Yahoo!, Facebook and Twitter — if you don’t ever have to leave the office to eat, you can keep working longer hours.
But as the Wall Street Journal reports, the IRS is paying attention to these freebie fests, by way of routine audits at some companies, according to tax lawyers.
If an employer hasn’t withheld taxes for those meals, the IRS might try to collect back taxes, most likely from the company and not the worker, though in theory, it could do so.
It’s also listing “employer-provided meals” on its annual list with the U.S. Treasury Department top tax priorities for the fiscal year ending in June 2015, with “new guidance” for companies.
“I suspect this is going to be guidance on these free cafeterias, that the benefit has got to be included in income,” one employment-tax attorney tells the WSJ.
It’s a tricky gray area — meals provided by your company that aren’t a lunch or dinner here and there are considered a taxable fringe benefit, like using the company car.
But meals don’t have to be taxed if workers get them for a “noncompensatory” reason for the “convenience of the employer.”
So your boss has to provide meals if you work say, in a desert outpost with no other options around, or if the nature of your job makes it impractical to leave the premises.
As such, many of those free-meal programs could fit under the convenience test, argue some lawyers, saying it saves time for workers, and can provide healthier options as well. Plus, one points out,”maybe you don’t want your employees running around in other eateries talking business.”
Those free meals aren’t going anywhere just yet, however, as experts believe the issue will be battled out in the courts.
Silicon Valley Cafeterias Whet Appetite of IRS [Wall Street Journal]
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