As the labor market becomes more and more competitive, businesses are looking for innovative ways to provide employees extra perks at the workplace. One workplace benefit that is often used is through employer provided meals. By understanding the rules related to workplace meals, you can offer your employees a wonderful fringe benefit and realize additional tax savings at the end of the year. After all, everyone works better with a full stomach!
Meals provided to an employee are a tax deductible business expenses for the employer and is generally tax-free to the employee as a de minimis fringe benefit if the benefit is reasonable and is provided to allow for an extension of the normal workday, so the employee can work overtime. In addition, meals must be provided only on an occasional basis.
If overtime is a common occurrence or if meals are contractually obligated for overtime work, then the IRS doesn’t consider the meals provided as “occasional”. If the meals provided are deemed “not occasional”, the meals may have to be included in the employees’ gross income.
What else can I provide besides de minimis overtime meals?
The following list are 100% tax deductible business expenses that are considered tax-free de minimis fringe benefits to the employee.
- Meal expenses for a company picnic or holiday party
- Office Snacks (This includes healthy snacks too! It doesn’t have to be donuts!)
- Meals provided to more than half the employees to keep them working late, working on the weekend or being on call
- Meals provided at a cafeteria or other facility on the business premises and the meals are provided to more than half of the employees at your convenience
Certain meals are still tax-free to the employee but only 50% deductible for the employer. Those meals include:
- Meal expenses for office meetings as long as there is a business purpose for the meeting
- Any meal during business travel
- Meals with clients, vendors or referral sources as long as there is a business purpose
- Meals at a seminar or convention
Fringe benefits are a great way to keep your employees happy and healthy at the workplace. We all have to eat! You may as well receive a tax benefit for eating, right?