Are the Meals and Entertainment Your Employer Provides Taxable?

If your employer provides such benefits as meals and entertainment, do you have to keep track and are they taxable? Unfortunately, there are numerous complicated rules dictating whether these benefits are taxable or not. Some of these rules are:

 

• If your employer periodically provides supper money if you need to work late, it is tax free unless it becomes a frequent occurrence and then it’s taxable.
• If entertainment allowances are used strictly for business purposes, they are not taxable but if used for personal entertainment they do become taxable.
• Company provided parties and picnics are considered tax free if the employer only sponsors them on an occasional basis.
• Executive dining rooms may be considered tax free if the purpose of eating on company grounds is for the convenience of the employer and not the employee. Additionally, if the employee would be able to consider the meal cost a valid business expense the meal provided in the executive dining rooms would be tax free.
• Company cafeterias are considered tax free if they are available to all the different levels of employees, not just upper management, the top executives, owner-employees and the higher paid. Although, any revenue generated must be used to cover operating expenses or it becomes taxable.
• Any meals and lodging if provided on employer’s premises and are for the employer’s benefit rather than the employee’s are tax free. Additionally, these expenses are totally deductible by the employer.
• Club memberships are taxable unless its use is strictly for business purposes but the employer can treat the membership dues expense as compensation to the employee.

 

While these regulations initially appear complex, by evaluating each employer provided meal or entertainment benefit it should be relatively easy to determine if you, as an employee, need to keep records for tax purposes. If the employer determines these benefits are taxable, it is their obligation to provide the documentation of any taxable benefits for you to use in preparing your income tax return. If you determine the benefits are tax free enjoy them! But if you determine they are taxable, keep records, pay the tax but still enjoy the benefits!

Submitted by Kathryn Shrader