Free Food

[Guest longhurdler]

On what basis are companies able to offer free food (meals) to their employees as a perk (not as part of requirement to keep employees on-site because they are needed to work)? Must the value of the food be included as income on the employees' W-2s? Are employers able to take a deduction for the expense? Thanks.

[PensionPro]

Certain meal and entertainment expenses are subject to a 50% limit. If meals or entertainment are provided for the benefit of employees, the employer can write off 100% of the cost as a business expense. This is an exception to the usual 50% write-off rule. Common examples of expenses that can be written off at 100% include:

• Meal and entertainment expenses for a company picnic or holiday party.
• Free coffee, bottled water, donuts, etc. provided to employees at the place of business.
• Free food or beverages provided to the public for promotional purposes.
• Meals provided at the place of business to more than half of the employees as an enticement for working after-hours, weekends, or holidays.
• Cost of meals included on employee W-2 forms as taxable compensation.

[jpod]

Is someone asking this question because they are under examination by the IRS or someone else with the ability to cause pain? If so I would suggest that the food is fully taxable unless it is provided for legitimate business meetings or can be excluded as a de minimus fringe benefit under IRC Section 132.

Is someone asking just because he/she is curious? If so, I would suggest that he/she not be so curious and worry about other matters instead.

[david rigby]

Usually it has something to do with the employer's convenience.

With a previous employer, we got a company-provided lunch. It was tax-free from IRS perspective but was taxed at $1 per day for FICA purposes.

[Guest longhurdler]

Note the April 7 WSJ article entitled "Silicon Valley's Mouthwatering Tax Break, Debate Emerges Over Whether Daily Fringe-Benefit Meals Are Taxable; Issue Is Now on."