If there’s food at a meeting, you’ll get higher turnout. OK, I just made that up, but I think a government grant is in order for me to study that very principle, and I suspect that when the results come back indicating that my thesis is correct, everyone will say, “Duh.”
People love free food. And free food has long been a perk of the startup world. But the IRS has started to take note that food that is free to the employee actually costs money. And furthermore, employees need to eat anyway, so if employees are eating at the office, they are saving money by not having to procure their own food, therefore they should be (drum roll, please) taxed on it.
I really wish I were joking. I also hope that The Washington Post is making up this part: “For example, Dyson [a tax attorney working on these food cases] said she’s had the IRS tell her that a bagel is more like a meal than a snack.”
As someone on a perpetual diet, I can see the IRS’s point. A chocolate chip bagel with honey walnut cream cheese from Bruegger’s Bagels comes in at 480 calories. As someone with a clue, I think the IRS is nuts. Just try handing out bagels to your staff members and then forbidding them to eat lunch “because they’ve already eaten!” It will not go over well. (Of course, at least it would be better than what our kids get in public school.)
To keep reading, click here: Free food makes employees happy, so naturally the IRS wants to tax it
The IRS staffers are just jealous because they don’t get snacks or lunch supplied by their employer. Out of revenge, they want to ruin what other people have. Is this an example of the sin of envy?
Ha, ha. Probably.
What about companies that provide a full kichen or even a full cafeteria for their employees. These lunches are adding a big perk to attract people without havin to be taxed on it. If a company spends $5 a day or $25 a week or $100 a month or $1200 in tax free benifits for their employees. The big offender is someone like google who has a full free. Cafeteria that is open all day for anyone to eat at for free. Just think of people who eat breakfast and lunch there then get a coffee or two during the day. That can easily add up to $5000 a year
It absolutely adds up. But, I still don’t think the IRS should be taxing it. It would be too difficult to gauge accurately anyway, and you’d either end up with an accounting nightmare or punishing small eaters.
Here is the problem. Companies get to write off the food as a business expense. Then the company gets to give the employees the food instead of money that will be taxed. I know wages are also considered a business expense. What other perks that could easily add up to 1000’s of dollars should a company be able to give to it’s workers tax free?
I am happy with pretty much any perk I can get. If the IRS is not involved, it makes it even sweeter.
I have not yet heard of a company that is skimping on salaries because they have free lunches.
Lunch. Vacation time. Sick leave. Health insurance. 401K match. Foosball table. <== benefits that may or may not convince someone to apply to and work for the company.
If employees who get a "free" lunch are then taxed on what the IRS claims is the value of that lunch, the IRS should also allow all employees who buy lunch to deduct the cost of those lunches from their taxes. … No?
Well then.
It also occurs to me that providing snacks and/or meals to employees can be an effective employee retention initiative. Assume an employee who earns $50 thousand per year. Recruiters will charge $10 thousand or more as their fee. Companies like google, as mentioned in the previous comment, clearly want to keep their employees, and keep them from jumping to competitors or near competitors. Food helps. In addition, if dinner is available, some employees will work well into the evening providing additional productivity to the company.
There can be other motivators. In 1996 and 1997 I worked in Ireland. The company offered a heavily subsidized lunch consisting of meat, three vegetables, and potatoes. Given the competitive wages we paid in this small town versus income taxes and the cost of living, disposable income was a narrow slice of employees’ take home pay. For quite a few of the employees, lunch at the company cafeteria may well have given them the clear majority of the nutrition and calories they needed for their health.
Free food isn’t nearly enough to be an “employee retention” thing. It may help to get people to apply and accept the offer, but it’s not enough to get someone to stay.
“if dinner is available, some employees will work well into the evening providing additional productivity to the company. ”
This is scarily true. I have visited the Googleplex at 7pm. There were more people in that cafeteria at 7pm than in most restaurants. Don’t those people have homes??
The problem with “food as pay” is…what if you don’t eat the food? How will auditing work? Will the IRS be sending staff to monitor lunchtime sessions to determine how much food you ate, its value, etc? And if I eat my own food too, does the free food count as a “meal”?
It would be no different if the company placed a box of ten dollar bills near the door every day and told the employees they could take one or two every day. It would be impossible to audit as well.
I think this argument comes from the employee side not the business side. It’s mentioned in the article that the employer should increase compensation if they remove the food perk.
The argument for the people who doesn’t get the food perk is why are all of my compensations being taxed while the people who are benefiting from the free food don’t want to see their compensations reduced.
I don’t care how difficult it is to audit, the only question is is everyone paying their fair share of taxes.
Almost be definition, if it’s almost impossible to audit, then it’s impossible, or close to it, to make sure that everyone pays their fair share.