Watch out: Free lunch at work could be taxable
Some Silicon Valley businesses are getting IRS scrutiny for supplying workers with no-cost food, which 'can't be just disguised wages.'
Is sitting down with your colleagues for a work-funded meal a chance to brainstorm and collaborate -- or a fringe benefit that should be taxed?
That's an issue The Wall Street Journal recently reported on as the IRS looks at some companies, particularly in high tech, that regularly provide free food to their employees.
As an example, the WSJ points to Google (GOOG). The search engine giant has more than 120 free-for-employee cafes at its facilities around the world serving over 50,000 meals daily. Google's website notes its offices and cafes "are designed to encourage interactions between Googlers within and across teams, and to spark conversation about work as well as play."
Facebook (FB), Yahoo (YHOO), Twitter and other tech companies offer free meals at their offices, and many workers consider the food a reasonable trade-off for their 24/7, high-pressure jobs. But some tax experts believe those meals should be treated as taxable income.
If the IRS is "in there auditing, and you're not taxing the meals, they're going to challenge you on it," employment-tax attorney Thomas Cryan Jr. told The Journal. "I have worked on audits for large tech companies in Silicon Valley on this exact issue."
Cryan says employers caught in that situation usually settle with the feds and come up with a fair-market value for the free meals. Those costs are then passed on to the employees, but with extra pay included in their checks to cover the larger tax bills.
Part of this issue is how a company structures its work culture and whether companies that offer their workers free food have an unfair advantage over rival organizations.
"You can provide free meals to employees for the convenience of the employer," William Weissman, a partner at the Walnut Creek, Calif., branch of Littler Mendelson PC, told the Silicon Valley Business Journal. "The question is what that really means and are all Valley companies providing meals just for that purpose? Food can't just be disguised wages."
While hundreds of millions of dollars could be at stake, some observers wonder if an IRS crackdown on free food is worth the potential cost it might have on the Silicon Valley's successful business model.
When does it stop? We have to pay city taxes here noted as "The privilage of the right to work in Denver." Um, hey morons, our company brings in people to your city that wouldn't normally be there to buy lunch, gas for their car, shop on their lunch breaks, etc, etc and you tax them for it?? They are already providing additional revenue to your city!
This is getting out of hand. Every time I turn around a new tax is being issued and the government is dipping even further into the American's back pocket. When was the last time anyone felt like their paycheck could actually stretch? Not me. I used to be okay and now I'm hand to mouth with the rising cost of everything across the board. Enough already. Go bother some rich people and leave me alone!
OK people need to understand the issue the IRS is going to tax this IF the company is trying to write off the expense as employee cost. If your employer gives you a free lunch and does not try to deduct the expense then you would not have to pay income tax on it. Companies list it as an employee benefit which means it is a tax write off for them that makes it non monetary compensation. For instance if a company could write off employee non monetary compensation without it being counted as income for the employee then an employer could pay you by giving you a house to live in and a car to drive so you wouldn't have to pay for either.
That being said the tax and spend mentality of our various levels of government are way out of control.
Don't hold your breath on that one. I think Congress has didn't strokes for different folks, and that don't mean you. Please pay your govenment, they need to get all the money they can get,and if they can't get your money on things like this, well they can by uping the annie (taxes).
But please keep sending other countries our hard earned dollars. Thank you, and hope all of you in government have a nice day, you a-- holes.
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Reports say the generous benefactor behind the huge gratuities is a former PayPal executive.
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