No more free lunch?

[t_minger64]

Are employer provided meals 100% deductible to the employer?

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What is the name of your state? FL
My employer was buying everyone (three employees) lunch every day. Our business stays open during the day, we eat on site and regularly conduct business between bites. His accountant has since told him that these expenses are not tax deductible. I've been to the IRS website and even called the IRS on this matter. I know that there is a 50% deduction, but there was also a 100% deduction discussed, but I'm not sure what the qualifications for the 100% deduction are. Are meal deductions a 'red flag' for auditors? He currently has one legitimate employee (me) paid on a W2. He also has two guys that he pays on a 1099misc. (also on the advise of his accountant) that I know do not pass the 'twenty question' test on determining 'employee status'. He files taxes on a schedule C as the company is a sole proprietership. I was rather enjoying the 'free lunch' and am a little put out that the accountant has suddenly decided that its in the best interest of my employer to discontinue this practice. Thanks for your insight.me of your state?

 

[efflandt]

Some information on business expenses and links to more info is at http://www.irs.gov/taxtopics/tc514.html

Meals are deductable when staying out of town overnight. entertainment is deductable (ie, taking business clients to lunch), and business meetings are deductable. But calling personal or employee lunches business meetings every day may be frowned upon by the IRS.

 

[LdiJ]

From the IRS website, Publication 15:

Meals and lodging. The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment.

“For the convenience of the employer” means that you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. For example, meals that you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience.

However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. A written statement that the meals or lodging are for your convenience is not sufficient.

50% test. If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes.

For more information, see Publication 15-B, Employer's Tax Guide to Fringe Benefits.

Therefore, if the meals are not taxable to the employee because they are for the convenience of the employer, then they are ALSO tax deductible to the employer for the same reason.

In my opinon your employer's accountant has made an error. However, there is also the possibility that your employer no longer wishes to provide the meals, and is using his accountant as a scapegoat.

You should insist on getting a proper lunch hour from now on if your employer is no longer going to continue providing the meals.