Publication 15-B Employer'S Tax Guide To Fringe Benefits

Each of these employees is, at times, called upon to

an employee of the corporation. A 2% shareholder is

perform services during the meal period. Although the

someone who directly or indirectly owns (at any time dur-

hospital does not require these employees to remain on

ing the year) more than 2% of the corporation’s stock or

the premises, they rarely leave the hospital during their

stock with more than 2% of the voting power.

meal period. Since the hospital furnishes meals on its

premises to its employees so that more than half of them

Moving Expense Reimbursements

are available for emergency calls during meal periods, the

hospital can exclude the value of these meals from the

This exclusion applies to any amount that you give to an

wages of all of its employees.

employee, directly or indirectly (including services fur-

nished in kind), as payment for, or reimbursement of,

Short meal periods. Meals that you furnish during

moving expenses. You must make the reimbursements

working hours are furnished for your convenience if the

under rules similar to those described in chapter 13 of Pub.

nature of your business restricts an employee to a short

535 for reimbursements of expenses for travel, meals, and

meal period (such as 30 or 45 minutes) and the employee

entertainment under accountable plans.

cannot be expected to eat elsewhere in such a short time.

The exclusion applies only to reimbursements of mov-

For example, meals can qualify for this treatment if your

ing expenses that the employee could deduct if he or she

peak workload occurs during the normal lunch hour. How-

had paid or incurred them without reimbursement. How-

ever, they do not qualify if the reason for the short meal

ever, it does not apply if the employee actually deducted

period is to allow the employee to leave earlier in the day.

the expenses in a previous year.

Deductible moving expenses include only the reasona-

Example. Frank is a bank teller who works from 9 a.m.

ble expenses of:

to 5 p.m. The bank furnishes his lunch without charge in a

•

cafeteria that the bank maintains on its premises. The bank

Moving household goods and personal effects from

furnishes these meals to Frank to limit his lunch period to

the former home to the new home, and

30 minutes, since the bank’s peak workload occurs during

•

Traveling (including lodging) from the former home

the normal lunch period. If Frank got his lunch elsewhere, it

to the new home.

would take him much longer than 30 minutes and the bank

strictly enforces the time limit. The bank can exclude the

value of these meals from Frank’s wages.

Deductible moving expenses do not include any

expenses for meals and must meet both the dis-

Proper meals not otherwise available. Meals that you

tance test and the time test. The distance test is

CAUTION

furnish during working hours are furnished for your conve-

met if the new job location is at least 50 miles farther from

nience if the employee could not otherwise eat proper

the employee’s old home than the old job location was.

meals within a reasonable period of time. For example,

The time test is met if the employee works at least 39

meals can qualify for this treatment if there are insufficient

weeks during the first 12 months after arriving in the gen-

eating facilities near the place of employment.

eral area of the new job location.

Meals after work hours. Meals that you furnish to an

employee immediately after working hours are furnished

For more information on deductible moving expenses,

for your convenience if you would have furnished them

see Publication 521, Moving Expenses.

during working hours for a substantial nonpay business

reason but, because of the work duties, they were not

Employee. For this exclusion, treat the following individu-

eaten during working hours.

als as employees.

•

Meals that you furnish to promote goodwill, boost

A current employee.

morale, or attract prospective employees. Meals that

•

A leased employee who has provided services to

you furnish to promote goodwill, boost morale, or attract

you on a substantially full-time basis for at least a

prospective employees are not considered furnished for

year if the services are performed under your pri-

your convenience. However, you may be able to exclude

mary direction or control.

their value as discussed under De Minimis Meals on

page 11.

Exception for S corporation shareholders. Do not

Meals furnished on nonworkdays or with lodging.

treat a 2% shareholder of an S corporation as an employee

You generally cannot exclude from an employee’s wages

of the corporation. A 2% shareholder is someone who

the value of meals that you furnish on a day when the

directly or indirectly owns (at any time during the year)

employee is not working. However, you can exclude these

more than 2% of the corporation’s stock or stock with

meals if they are furnished with lodging that is excluded

more than 2% of the voting power.

from the employee’s wages as discussed under Lodging

Exclusion from wages. You can generally exclude quali-

on Your Business Premises on page 11.

fying moving expense reimbursements that you provide to

Meals with a charge. The fact that you charge for the

an employee from the employee’s wages. If you paid the

meals and that your employees may accept or decline the

reimbursements directly to the employee, report the

meals is not taken into account in determining whether or

amount in box 12 of Form W-2 with the code P. Do not

not meals are furnished for your convenience.

report payments to a third party for the employee’s moving

S corporation shareholder-employee. For this exclu-

expenses or the value of moving services that you pro-

sion, do not treat a 2% shareholder of an S corporation as

vided in kind.

Page 13

Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 13

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