Tax treatment for meal costs and snacks provided at company offices

Meals and snacks provided to employees are tax free right? The IRS says not so fast food.

The IRS has ruled that meals provided to employees are taxable unless the employer establishes substantial business reasons for providing the meals or that the meals are provided for the employer’s convenience (and not part of compensation). The takeaway from the Technical Advice Memorandum (TAM) is that employers must have valid reasons for providing meals tax free, and back them up with data. Increased convenience and accessibility of meal delivery services becomes a factor to consider in your meal policy.

The IRS also ruled that snacks for employees in designated snack areas can be provided without taxation (with specifications). So, doughnuts in the breakroom are okay just don’t make a meal out of it.

The TAM is lengthy and technical. If you provide meals to your employees, you should address the issues raised in the TAM to ensure that the meals provided are not taxable to the employee. Please call us to discuss this ruling as it applies to your business in more detail.