The IRS has been going over with a fine-tooth comb employer providing free or reduced-price meals to employees on the business premises. If you are here, that means you are looking to read about The IRS on Employer-Provided Meals, so let’s get started!
Employer-provided meals are tax-free to employees under §119, Meals or lodging furnished for the convenience of the employer if provided for the employer’s convenience; otherwise, their value is included in the employee’s gross income. For the employer, 50% of the cost of the meals is deductible through Dec. 31, 2025.
When are employer-provided meals acceptable for the employer’s accommodation?
According to the IRS, “are necessary for the employee to properly discharge the duties of a particular job position.” Meals are still tax-free, employees decline them:
ex., employees bring their own meals from home or the provided meals don’t meet their dietary requirements.
If your company provides such meals, be ready to show one or more concrete reasons why the meals are for your company’s benefit, or you will be required to provide the cost of the meals in employee compensation.
In recent audits, employers provided the IRS a number of reasons why meals are for provided for the employer, including:
- Innovation and collaboration are a key aspect of a company’s business model and culture, and the meals the employer provides facilitate employee innovation, collaboration and productivity.
- Meals are provided to enable employees to work long days and overtime.
- Meals are provided to promote a healthier workforce because the employer-provided meals are more healthful than the meal options available to employees off-premises.
- Meals are provided to discourage employees from jeopardizing trade secrets by encouraging them to remain on the business’s premises for meals, rather than leave the premises and possibly discuss sensitive information during meals in public places.
The IRS said that many reasons don’t meet the requirements of §119. The IRS says §119 requires that the employer-provided meals be necessary for the employee to properly perform his or her duties.
ex. the employee is on call
Employers can be required to provide the IRS proof of the business reasons for furnishing the meals.
Employers also may be required to show that the meals are an established policy that is communicated to employees. Also, employers must demonstrate that the policy is enforced.
The IRS currently is working on revised regs for employer-provided meals. [AM 2018-004]
Pro Tip: Birthdays or other celebrations meals, may just be tax-free to employees as de minimis fringe benefits. Under §132,
Looking for more bookkeeping information or tips? Check out our post on Signs of Payroll Fraud