Many small businesses and independent contractors are working hard to file taxes on time as the 2018 tax deadline approaches. Small business owners often have to decide whether employer-provided meals can be taxed. Understanding the tax deduction rules for entertainment and meals can be difficult. It is important to understand the guidelines to report the amount of tax-deductible and non-taxable money spent on meals. Let’s look at some scenarios where employer meals might or may not be taxable.
How It Works
Employees and employers can enjoy great tax benefits when they eat company-provided meals. Employers can claim a tax write-off on money spent on meals, while employees receive the tax-free benefit. Anything the employer provides as part of its compensation to employees can be considered taxable income. This includes meals. The only caveat is that meals provided by the employer on their premises for convenience are 100% tax-deductible for the employer. This category does not include coffee and donuts because they have a minimum value that makes accounting impossible.
To be eligible for the benefit, the employer must provide 100% of the employee-provided meals at the employer’s expense.
- Lease or buy the building where the meals are served
- be managed by employees of the company or contracted third parties
- Be near or on the premises of the business
- Serve food before, during, and immediately after work hours
To be considered a convenience meal for an employer, the meal must comply with these requirements:
- Employees should be available to respond to emergency calls
- Short meal breaks are not provided
- There are no good restaurants in the area.
Taxation can apply to entertainment and meal deductions in many cases. It is taxable if the meal is provided after work hours to employees who are unable to eat at a reasonable time. Employee meals provided by the company on non-workdays are not taxed. Taxable restaurants that offer meals to employees before, during, or after their shifts are over are taxable.
In many cases, employer-provided meals may not be taxable. Knowing the differences makes it easier to file your business taxes. Tax and Law Research Inc., one of California’s most prominent financial advisory and accounting firms, is Tax and Law Research Inc. Our holistic approach is progressive and comprehensive. We provide our clients with safe financial planning options and tax-efficient strategies. Contact us for more financial advice and tips.