IRS: Latest info on when free meals provided to employees are taxable New Memo answers common questions about on-site food The IRS just released some helpful guidance on a confusing scenario: whether to count free meals given to employees as taxable income. According to a new Technical Advice Memorandum (TAM), meals provided by employers are taxable in most cases. Generally, for meals to be excluded from workers’ income, two situations must apply, as listed in Internal Revenue Code Sec. 119 – the meals are: Provided on the employer’s business premises and Furnished solely for the employer’s benefit. In the TAM, the IRS answered a question about an employer’s policy for providing free meals on site. The employer claimed it had multiple reasons for providing meals, including fostering collaboration between employees, encouraging workers to stay on premises, protecting proprietary business info and keeping workers safe. However, the agency said that none of these reasons the employer gave would make the meals excludable. The burden is on employers to prove free employee meals fall under the Sec. 119 exclusion. Companies must provide adequate policy documentation that links the meals to business necessity. Bottom line: If an employer can prove workers need these meals to do their jobs, the exclusion would apply. Impact on delivery services Besides general clarification, the IRS also discussed another wrinkle that could impact employers’ eligibility under Sec. 119 – meal delivery. With the rise of delivery services such as Grubhub, it’s easier than ever for employees to obtain meals while working, eve in remote areas. So employers may have to provide additional proof that it’s absolutely necessary to furnish free food on site. Ultimately, the agency said, the facts will vary based on each individual employer’s circumstances. While meal delivery may keep some companies from qualifying for the exclusion, other may have valid security reasons.
IRS: Latest info on when free meals provided to employees are taxable
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