Kingston, NH, November 25, 2009 --(PR.com
)-- Tom Mac Dermott, president of the food service consulting firm Clarion Group warns employers who subsidize their employee food services should beware of a new drive by the Internal Revenue Service. IRS audits are increasingly focusing on a provision of the federal tax code that considers the cost of meals provided to employees that exceed the amount paid by the employees to be taxable income.
The IRS announced recently that it was focusing on potentially taxable employee benefits, like country club membership, gifts and the like, including employee meals that that are provided free or subsidized.
“For example,” Mac Dermott said, “if your company provides meals for 500 employees a day at a cost of $3,000 a day for food and labor, but take in only $2,000 in payments from employees, the $1,000 extra cost that the company absorbed is considered income to the employees and is part of their taxable income.”
The Clarion Group released information to their existing clients on tips on how to convince the IRS auditors that their food service should be non-taxable.
The IRS’s tests for “employer’s convenience” are:
· More than half of your employees are furnished meals for your convenience – for example, that you need to keep them on the premises so they’ll be available to return to work immediately after the meal period.
· The employees’ scheduled meal period is too short to permit them to go off premises for a meal.
“Meals furnished after work hours also qualify under the ‘employer’s convenience’ rule if they would have been furnished during work hours, but were not, because of work duties,” Mac Dermott said.
“It would be wise to be ready to prove to the auditor that your employee’s subsidized meals are a business necessity when the IRS come calling,” he added.
About Clarion: Clarion Group is a food service consulting firm that works with companies, professional firms and educational institutions nationwide to improve the operation and reduce costs of their in-house food service operations.