Google Chef Jason Wilson, right, holds some chocolate chip cookies
Google Chef Jason Wilson, right, holds some chocolate chip cookies

Free food is almost synonymous these days with technology companies, the fuel that helps HR recruiters attract and retain employees.

In Kirkland, Google hired world-renowned chef Jason Wilson to run the kitchen, while Seattle startup Has Offers last year brought on board chef Chris Blanco to keep the geeks well fed and hydrated.

But could the free gravy train come to an end?

The Wall Street Journal reports that the IRS is currently investigating whether employees should pay additional taxes on the free food as added compensation.

Journal reporter Mark Maremont writes:

Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules.

The story quotes some accounting experts as saying that the meals should be counted as taxable income, part of an employee’s compensation. If the meals are charged at $8 to $10, The Journal notes that employees could take a tax hit for as much as $5,000.

This will certainly be a hot issue to watch in the lunch rooms and cafes of tech companies everywhere. What do you think? Should an employee’s free lunch be counted as taxable income?

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Comments

  • robotlogic

    Why not have the President and members of congress pay taxes for all their free food and benefits first?

    • http://twitter.com/ExtendedResults Extended Results Inc

      Awesome! Yeah!

  • KK

    First work on the bigger issues such as healthcare and immigration before worrying about how to make a few extra bucks for the IRS.

  • http://www.heatherphysioc.com/seo-blog Heather Physioc

    I wonder how it would work when a corporation buys pizza and salad for the entire company (of 400 people or so) to celebrate or even just for morale, but let’s say not all take advantage of it — maybe 250 people actually come through the “buffet line” and take advantage of the free grub. How do you cost-efficiently monitor this, track it and include it on someone’s W-2? What about companies that charge no premiums for employee health insurance? Would this fall under the same rules?

    • Guest

      We could start a new government agency that could put auditors in all companies that could monitor the consumption of free food, snacks and sodas. Then we could accurately track the taxes the government can charge.

      There problem software.

    • Ryan Parrish

      The health insurance question is already handled by the patient protection and affordable care act. http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act#Funding

  • Guest

    It is NOT really FREE food. The food, kitchen supplies and personnel have already been paid for and TAXED. So why does the IRS think they need to double-dip on charging more taxes.

    Give me a break.

  • The_Tim

    “Employees could take a tax hit for as much as $5,000″ is dramatically overstating the effect this would have.

    $5,000 would be two $10 meals a day, five days a week, 50 weeks a year. I think it’s unlikely that many employees eat that regularly at work, but even if they did, the $5,000 would just be their additional “income” that would be taxed by the IRS.

    Assuming most of these employees are making good (but not crazy) money, they’re probably in the 28% tax bracket, which means their actual tax hit in this hypothetical scenario where two thirds of their meals are employer-provided would be ~$1,400.

    • johnhcook

      Thanks Tim. Good point, and thanks for the followup.

  • Mike

    This exact same thing happened with gym memberships. Microsoft used to give every employee a ProClub membership. Then the IRS decided to tax it, so the policy changed to something worst for Microsoft and the employee. However, that is the US income tax policy.

    • Ryan Parrish

      What are you talking about? Microsoft still has gym memberships as part of the health and wellness benefits. Only now you get a choice of gyms and not just ProClub, which isn’t convenient for most MS employees anyway.

  • supersad

    This is pathetically sad. The IRS pays out 3 billion a year in refunds to illegal immigrants in the form of child tax credits, is a known problem they choose to ignore and we want to tax a employer perk. I know, maybe google should just offshore all the jobs like my employer and then we’ll just collect food stamps, seems that’s what Uncle Sam really wants, U.S.A. a third world country.

  • Guest

    Google gives out FREE chocolate chip cookies… I want to sign up…

  • Bill

    First, I’d be surprised if the IRS really followed through on this at least for lunch. Lunch is a regular convenience of the employer exception and a good employer argument since they get more work and more productivity with people onsite versus offsite. If they seriously wanted to start taxing every company lunch it would be ridiculously expensive from a compliance perspective.

    Second, even if it was taxable then they would likely find a low cost for the meals. I’d agrewe with The_Tim. Meals would not be charged to the employee at fair market cost, it would be charged at the employer’s cost. The outside cost is what did in the gym membership cost for Microsoft because the gym was an outside vendor and expensive. If they passed through the meals at cost it is probably more like $5 per meal 5X per week (one per day generally), $25 week, 48 working weeks a year max after vacation and holidays is $1,200. At that level, a tax gross-up would seem workable similar to what many companies provide when you win a taxable prize.

  • http://paulsalzman.com psimac

    Charge employees $1/meal and the IRS would collect $0. The State would collect some sales tax and problem solved. It’s amazing the IRS would even attempt this. Let’s be even more anti-business, IRS!

  • fedup

    NO, My God what is next. My employer had drinking fountains put in for us. It would seem to me that this could be a taxable “perk” also.

  • Happy

    My employer gives free toilet paper and tampons!! Should it be taxed too?

  • jim

    Being of Generation X, ‘geek’ is, has been, and always will be an ugly word to me. A redefinition to classify specific white-collar employees doesn’t alter its historically derogatory connotation.

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