Thomas M. Cryan, Jr., Shareholder in Buchanan Ingersoll & Rooney’s Tax Section, was recently quoted in The Wall Street Journal about whether free meals given by employers should be taxed. In Silicon Valley, many companies offer free snacks and meals to their employees, causing a growing controversy about whether these freebies count as a fringe benefit that should be taxed. Tax rules regarding fringe benefits generally categorize meals that are regularly provided by employers as a taxable perk.
In “Silicon Valley's Mouthwatering Tax Break,” Cryan explains, “If [the IRS is] in there auditing, and you're not taxing the meals, they're going to challenge you on it. I have worked on audits for large tech companies in Silicon Valley on this exact issue."
Cryan further explains that employers generally settle the challenge before coming up with a fair-market value for these free meals, which is then included in their employees’ future paycheck stubs. In such cases, Cryan says that companies will often give their employers extra pay to cover the larger tax bills, so that the employees do not lose out.
Read the full article – “Silicon Valley's Mouthwatering Tax Break” (The Wall Street Journal, April 7, 2013)