In late 2018, the IRS issued a Technical Advice Memorandum addressing the tax treatment of meals and snacks provided by a taxpayer to its employees. The memo highlights the extent to which the IRS analyzes such employer provided benefits when reviewing whether it was proper for the value of such meals and snacks to excluded from an employee’s gross income.
While snacks may be excluded from an employee’s gross income as a de minimis fringe benefit, in general, meals may only be excluded if provided “for the convenience of the employer.” As the memo makes clear, while the IRS will give deference to an employer’s claim that providing meals to its employees is done for convenience – as well as a valid business purpose – the IRS will demand proof that the taxpayer has and enforces an actual policy furthering its purported business purpose. Additionally, there must be a connection between the policy and the employer’s decision to give meals to its employees.
Conclusion: Providing snacks to employees will not result in their receipt of any additional gross income, but regularly providing meals to employees on a free or discounted basis could result in adverse tax implications. To determine if an employer’s meal and snack policy has the potential to create an unpleasant surprise for its employees when tax season rolls around, consult your employee benefits counsel.
IRS Insight on Tax Treatment of Employer-provided Snacks and Meals