IRS Wants Tech Workers to Pay Taxes on Those Free Meals

Stop Eating

Stop Eating

The vaunted free meals offered to employees by the likes of Google, Facebook and Twitter are getting close attention from the Internal Revenue Service, which says free food is a taxable fringe benefit.

The Wall Street Journal reports that the IRS has been seeking back taxes from some employers who haven’t been withholding them on the value of the meals. Last week, the agency and the Treasury Department said taxing employer-provided meals was one of their top priorities for the fiscal year that ends in June 2015. One tax attorney told the Journal that she expects the IRS to indicate that free meals have to be regarded as income for tax purposes.

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That doesn’t mean a bunch of Silicon Valley workers should expect bills for back taxes. The IRS will probably seek to get money from the employers, who would be liable for failing to withhold appropriate taxes.

For tax purposes, employer-provided meals are often treated much like personal use of a company car—as a taxable fringe benefit. However, there are exceptions to the rules, such as when meals are offered for “noncompensatory” reasons. As examples, the Journal cites meals provided on oil rigs or at casinos, where security practices make it difficult for employees to eat outside of their place of work.

Critics say the untaxed meals give some employers an unfair advantage and distort the economy. Defenders argue that the meals are part of Silicon Valley’s culture and serve real business purposes, such as encouraging collaboration and more hours at work. “Look at the time savings,” said Mary B. Hevener, an attorney at Morgan, Lewis & Bockius LLP in Washington, D.C. “If your employees are able to eat lunch and get back to their desks in 20 or 30 minutes, that’s a big time savings.”

If companies have to treat meals as taxable income, will the benefit go away? Not necessarily. At least one company in Silicon Valley already pays its employees extra to cover the cost of any additional taxes.

In any case, the issue is far from settled. Tax attorneys expect the status of the meals will get sorted out in court.

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Comments

18 Responses to “IRS Wants Tech Workers to Pay Taxes on Those Free Meals”

September 05, 2014 at 11:26 am, Rob S said:

I don’t see how they can ever expect to tax the employees unless they can start tracking who’s ordering/eating what. So that means the companies will have to eat the tax burden if they offer this.

And what’s next? Taxing all companies who offer coffee to their employees?

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September 05, 2014 at 11:28 am, Rob S said:

I don’t see how they can ever expect to tax the employees unless they can start tracking who’s ordering/eating what. So that means the companies will have to eat the tax burden if they offer this.

And what’s next? Taxing all companies who offer coffee/tea to their employees?

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September 05, 2014 at 4:23 pm, Joseph said:

They did this once before during the 80’s. The IRS wanted companies to track who was drinking free coffee and collect tax for it. The result was that free coffee was eliminated. This is what happens when the government is drowning in debt, they look for ways to nickel and dime you for every little thing. Look for more of this kind of thing. Give them a chance and they will tax your urine.

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September 11, 2014 at 8:54 am, Jim said:

more than likely air and water

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September 13, 2014 at 8:39 am, DJ said:

I’ve worked in US Government offices where they had free coffee for everyone. (shift work..op center)… do you think anyone there was ‘gone after’ by the IRS ? do you think they were told “you can have free coffee for government employees, but the contractors will have to pay?”.. NO… I don’t think so.

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September 05, 2014 at 5:26 pm, Jim said:

Make it even more expensive to do business in America.

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September 05, 2014 at 8:25 pm, J said:

I’ve done taxes for 5 years and just because the IRS wants to tax something doesn’t mean it legally can. Under the current IRS tax code any food that employees eat at work is tax deductible as a business expense for the company. The IRS can enforce what’s on the books, but it doesn’t have the power to change the tax laws. Now if congress passes a law to tax this food, then the voters can fire the politicians who voted for this.

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September 05, 2014 at 10:00 pm, Nightcrawler said:

No no no no NO. Absolutely not.

And why just target tech companies? Plenty of companies give free food to their employees at least some of the time. I spent a few months working at a car dealership, and they brought in pizza a couple of times a month.

To say that the food is an “unfair advantage” is absurd. Other companies are not prohibited from purchasing food; they can choose to do the same darned thing, and many do (including those cheap-as-he// car dealerships). Additionally, as another poster pointed out, just because the company brings in free food doesn’t mean everyone eats it. One guy at the dealership was a health nut who rarely ate the company-provided food; he preferred his own, home-cooked, healthy meals.

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September 06, 2014 at 3:33 am, emilov said:

I thought taxes on pizza orders are paid when you or whoever pays for the pizza pays at the cachier… It sounds like an “after-tax” will be introduced.

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September 07, 2014 at 2:57 am, M. Hend said:

Why stop at food? If a company is offering better air conditioing than others, tax the employees; it’s an unfair advantage. If a company hires a good manager, tax the employees; it’s an unfair advantage; if the restrooms are cleaner…

Nice to know that GE can make $5 Billion and get away with paying nothing in taxes and Average Joe has to pay extra for an office pizza.

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September 08, 2014 at 9:30 am, COMPUTER SCIENCE GRAD said:

Lol, you just said what I was thinking and wanted to say. Very well put M. Hend. And to add, if the federal government has the authority to make American currency, how could they be in debt? If they do not have the authority, why not, and when did they lose it? No one or no organization can borrow money from itself. That is stupid. American people need to stop electing politicians who do nothing but rob the people blind and tell them its for their best interests.

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September 12, 2014 at 11:04 am, alan hawkins said:

@ CS Grad – why is the US government in debt and when did they lose the ability to make currency? When the Federal Reserve System came into existence.
Look at your paper money – it says “federal reserve note.”

Those regional federal reserve banks that lend billions of dollars to foreign banks? They are privately owned. Why did the Fed miss the housing and internet bubbles?

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September 12, 2014 at 9:34 pm, COMPUTER SCIENCE GRAD said:

Good catch Alan Hawkins. I knew that, but I don’t know too many people who realize that. The government need to possess the authority to print currency again. It should never be privately owned.

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September 08, 2014 at 8:44 am, Chaz said:

Remember that Congress makes the tax laws. The same elected officials that take “bribes” in the form of hunting/fishing trips, trips on private jets to vacation resorts, eat in the best restaurants all from lobbyists that are basically paying for your elected officials vote.

If this upsets you go to http://www.consumer-action.org/action/articles/make_your_voice_heard and http://www.house.gov/representatives/find/.
Write your representative and tell them how you feel.

A IT person who is working 50 plus hours a week and eats at his desk is going to be taxed for food and yet your elected official pays no taxes on the trips, meals and other “benefits” they receive.

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September 08, 2014 at 12:27 pm, Barry Gruner said:

Tell the IRS to stick it in their ear! Unbelievable!

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September 12, 2014 at 7:23 am, Scott said:

Looking down the line, the IRS will be gunning to tax your employer sponsored health insurance and your employer sponsored retirement plans (401k/457/etc) because they are “unfair advantages”.

BTW, Congress may pass the tax laws, but the IRS gets to “interpret” them. Just saying…

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September 12, 2014 at 7:25 am, Scott said:

Congress may pass the tax laws, but the IRS gets to “interpret” them. Looking down the line, the IRS will be gunning to tax your employer sponsored health insurance and your employer sponsored retirement plans (401k/457/etc) because they are “unfair advantages”.

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September 13, 2014 at 8:33 am, DJ said:

hmmm…. does that mean those PBJ sandwiches I made and gave to the homeless will be a taxable ….REPORTABLE…ITEM… to them on their 1040 forms? I can just see it now…

an IRS agent going street corner to street corner…. heating grate to heathing grate asking the homeless how many PBJ’s they’ve been given each quarter (you just KNOW the IRS will want them to file quarterly…) how many blankets, jackets, hats and pairs of gloves… how may bottles of “FREE WATER”… HOW MANY SCHOOL BACKPACKS, shoes, & jackets for their children. (you have to total it all up before you can be CERTAIN they fall beneath the minimum earnings levels to not have to pay taxes on that…don’t you??? ) .

KMN. (not my initials…. a short hand… you know what it means)

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