Internal Revenue Code § 119 allows employers to deduct 100% of the value of meals provided to employees when they are for the convenience of the employer, and they are furnished on the business premises of the employer. Meals provided for “the convenience of the employer” are also excludable from the employee’s taxable income. However, last month, the IRS announced that it plans to change that interpretation, which will have significant implications for both tax and wage and hour liability. The IRS announced as part of its Priorities Guidance Plan that it plans to issue new guidance regarding employer-provided meals, which we can assume is not a positive development for employers. The Wall Street Journal reported that IRS auditors have already started “flagging the issue and demanding back taxes from companies amounting to 30% of the meals’ fair market value.”
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