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Are Meals and Snacks Provided to Employees Taxable?

In general, meals provided to employees are taxable unless a specific tax exclusion exists. Under an exclusion for meals provided for the convenience of the employer., employers may provide meals tax-free to its employees. However, the business has the difficult burden of proving its for the convenience of the employer rather than as benefit to the employees.

Recently, the IRS issued a Technical Advice Memorandum which are used in actual audits. In this case, the business failed to prove its meals were for the convenience of the employer and thus the daily meals it provided to employees was taxable. Confidential info on the taxpayer is redacted but my guess is that it was a tech company in San Francisco.

Providing snacks to employees has different rules. Generally, quantifying the value consumed by each employee of snacks that come in small, sometimes difficult to quantify portions and are stored in open-access areas is administratively impractical given the low value of each snack portion, even if the employer offers the snacks on a continual basis. Therefore, the value of the snacks, furnished to its employees is excludable from income as a de minimis fringe benefit.

Note: Under Tax Reform, snacks are no longer treated as office expenses. They are now treated as meals which means employers can only deduct 50% of the cost.

For a consultation, on the exclusion of meals from taxable income, contact me today.

Richard Pon CPA, CFP