One of the benefits often mentioned for companies considered “great places to work” is the free food and drinks made available to the employees. This even gets used as a recruitment incentive to convince an employee they want to work for you. Well I have some potentially bad news for you, that free food may soon be a taxable benefit.
Income tax on your sandwich
My friend Jon Hyman has reported that the free meals companies provide to their employees should actually be taxed if the meal is not provided for the convenience of the employer. The IRS does allow tax free meals in situations where the meal is provided on the company premise and is done for the benefit of the company and not the employee. Otherwise the value of that meal should be added to the taxable income of the employee. According to Martin J. McMahon, Jr., professor of tax law at the University of Florida a company cannot provide tax-free meals if workers commute from home and have the ability to bring their lunches with them.
No free beer
I have friends that work at two companies that are considered progressive places and both companies offer free beer and wine to employees. A nice benefit! But according to Professor McMahon the company should be reporting the value of that beer to the IRS as taxable income.
Of course the IRS sees this as a potential boon so they are looking at this closely. If it comes to pass it will certainly put a damper on the offers of employment made by those companies who offer food and drink benefits. I can see that offer letter now “Your salary will be $50,000 annually plus, based on our review of your Facebook page, we will estimate another $3000 annually for the beer you drink.”