IRS keeps check on tax-exempt perks like free lunches

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BE CAREFUL when you grab that office bagel. The Internal Revenue Service (IRS) may be watching.

The US tax agency is taking a closer look at a popular tax-exempt perk offered by companies such as Google: free meals.

“There’s potentially a lot of tax revenue involved,” said Lawrence Zelenak, a tax law professor at Duke University in North Carolina. “It sounds like you’re being inherently trivial, but this is not.”

The rules may address the unusual legal question of whether employees at the Googleplex in California are more like New York office workers who can duck out for lunch or akin to lumberjacks in a remote logging camp who need to have food trucked in.

Technology companies that used their well-stocked cafeterias as a lure for prospective employees and a way to keep them on campus for longer had been challenged by the IRS in recent years, said Marianna Dyson, a tax lawyer at Miller & Chevalier in Washington. She represents some of the companies whose meal policies are being reviewed.

Under US tax law, workers don’t have to pay income or payroll taxes on meals provided “for the convenience of the employer”.

Another provision lets companies set up cafeterias to serve employees and deduct the full cost of the meals, not the 50 percent limit that applies to business meals.

“They also don’t want people leaving, particularly if they get in cars to find a place. They’re gone longer and lose time.” – Bloomberg

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