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

ees) that accounting for it would be unreasonable or ad-

1) The employee was a 5% owner at any time during

ministratively impracticable. The exclusion applies, for

the year or the preceding year.

example, to the following items.

•

2) The employee received more than $90,000 in pay for

Coffee, doughnuts, or soft drinks.

the preceding year.

•

Occasional meals or meal money provided to enable

You can choose to ignore test (2) if the employee was not

an employee to work overtime. (However, the exclu-

also in the top 20% of employees when ranked by pay for

sion does not apply to meal money figured on the

the preceding year.

basis of hours worked.)

•

Occasional parties or picnics for employees and

Meals on Your Business Premises

their guests.

You can exclude the value of meals you furnish to an

This exclusion also applies to meals you provide at an

employee from the employee’s wages if they meet the

employer-operated eating facility for employees if the

following tests.

annual revenue from the facility equals or exceeds the

•

direct costs of the facility. For this purpose, your revenue

They are furnished on your business premises.

from providing a meal is considered equal to the facility’s

•

They are furnished for your convenience.

direct operating costs to provide that meal if its value can

be excluded from an employee’s wages under the rules

This exclusion does not apply if you allow your employee

explained under Meals on Your Business Premises, later.

to choose to receive additional pay instead of meals.

If food or beverages you furnish employees qual-

TIP

ify as a de minimis benefit, you can deduct their

On your business premises. Generally, for this exclu-

full cost. The 50% limit on deductions for the cost

sion, the employee’s place of work is your business prem-

of meals does not apply. The deduction limit on meals is

ises.

discussed in chapter 2 of Publication 535.

For your convenience. Whether you furnish meals for

your convenience as an employer depends on all the facts

Employee. For this exclusion, treat any recipient of a de

and circumstances. You furnish the meals to your em-

minimis meal as an employee.

ployee for your convenience if you do this for a substantial

business reason other than to provide the employee with

additional pay. This is true even if a law or an employment

Employer-operated eating facility for employees. This

contract provides that the meals are furnished as pay.

is an eating facility that meets all the following conditions.

However, a written statement that the meals are furnished

1) You own or lease the facility.

for your convenience is not sufficient.

2) You operate the facility. You are considered to oper-

Meals excluded for all employees if excluded for

ate the eating facility if you have a contract with

more than half. If more than half of your employees who

another to operate it.

are furnished meals on your business premises are fur-

nished the meals for your convenience, you can treat all

3) The facility is on or near your business premises.

meals you furnish to employees on your business prem-

4) You provide meals (food, drinks, and related ser-

ises as furnished for your convenience.

vices) at the facility during, or immediately before or

Food service employees. Meals you furnish to a res-

after, the employee’s workday.

taurant or other food service employee during, or immedi-

ately before or after, the employee’s working hours are

furnished for your convenience. For example, if a waitress

Exclusion from wages. You can generally exclude the

works through the breakfast and lunch periods, you can

value of de minimis meals you provide to an employee

exclude the value of the breakfast and lunch you furnish in

from the employee’s wages.

your restaurant for each day she works from her wages.

Exception for highly compensated employees. You

cannot exclude from the wages of a highly compensated

Example. You operate a restaurant business. You fur-

employee the value of a meal provided at an employer-op-

nish your employee, Carol, who is a waitress working 7

erated eating facility that is not available on the same

a.m. to 4 p.m., two meals during each workday. You

terms to one of the following groups.

encourage but do not require Carol to have her breakfast

on the business premises before starting work. She must

1) All your employees.

have her lunch on the premises. Since Carol is a food

2) A group of employees defined under a reasonable

service employee and works during the normal breakfast

classification you set up that does not favor highly

and lunch periods, you can exclude the value of her break-

compensated employees.

fast and lunch from her wages.

For this exclusion, a highly compensated employee for

If you also allow Carol to have meals on your business

2002 is an employee who meets either of the following

premises without charge on her days off, you cannot ex-

tests.

clude the value of those meals from her wages.

Page 12

Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 12

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