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I employ janitors that work at grocery stores in California.

Customer Question
When i come on site...
I employ janitors that work at grocery stores in California. When i come on site to work on special projects or check on things (about once a week), i like to provide some snacks as a way of promoting good morale (like fruit in season, candy).I had read in the past that providing food to employees can result in them needing to pay tax on this. So i have been paying for the snacks personally. Can you confirm if there is any acceptable way for a business to provide food or snacks without negative tax consequences to either party?
Submitted: 1 month ago.Category: Tax
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3/21/2018
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,577
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is***** will be assisting you. I am prepping my response, which I will provide to you in the next thread(s).

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Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

In general, providing meals to employees is considered a fringe benefit and is taxable to the employee. The only way that the meal would not be taxable to the employee is if the snacks were served on your business premises. SEE BELOW:

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For an employee to exclude the value of meals received from an employer from gross income under the general exclusion in Sec. 119(a), the employer must furnish the meals on the employer's business premises. The "employer's business premises" generally means the employee's place of employment. The business premises include the place where the employee performs significant duties or where the employer conducts a significant portion of its business. Places near the employer's premises will not qualify, even though those places might be convenient. The business premises of the employer include any place on the grounds of the employer and not just the main structure. The meals must also be for the convenience of the employer, not the convenience of the employee.

REFERENCE SOURCE:

https://www.journalofaccountancy.com/issues/2015/jul/exclude-employer-provided-meals-and-lodging.html

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Customer reply replied 1 month ago
Ok, i read the article you sent, and have two follow-up questions:
1) since my customers location (the grocery store) is where my employees work, that would be considered the business premises, right? Since i don't have any other premises where they work for me.
2) the webpage you sent mentioned:
"An employee may exclude from gross income the value of small food items and soft drinks as a de minimis fringe benefit. In addition, an employee may exclude from gross income occasional meals provided in kind or occasional cash received to buy dinner to allow the employee to work overtime. The same treatment may be extended to food and drinks provided by the employer to employees and their guests at picnics and parties." What makes something a de minimis benefit? If i share small snacks and items once per week, like fruit and candy that i mentioned, would that qualify as being excluded from the employee's gross income?
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

A1: No, as you are the employer, it has to be YOUR business premises.

A2: I will check on the de minimis benefit and get back to you.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code. These include such items as:

  • Controlled, occasional employee use of photocopier

  • Occasional snacks, coffee, doughnuts, etc.

  • Occasional tickets for entertainment events

  • Holiday gifts

  • Occasional meal money or transportation expense for working overtime

  • Group-term life insurance for employee spouse or dependent with face value not more than $2,000

  • Flowers, fruit, books, etc., provided under special circumstances

  • Personal use of a cell phone provided by an employer primarily for business purposes

In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation.

Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount. The IRS has ruled previously in a particular case that items with a value exceeding $100 could not be considered de minimis, even under unusual circumstances.

REFERENCE SOURCE:

https://www.irs.gov/government-entities/federal-state-local-governments/de-minimis-fringe-benefits

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Customer reply replied 1 month ago
Ok, so if i understand correctly, my business can't provide any kind of snacks to my employees without tax consequences to them under the "employer premises" provision, but it can do so under the "de minimis" provision, so long as it fits with the definition of de minimis. "Occasional" has been defined as "infrequently or irregularly". Thus, once per week would not qualify as de minimis, even though the value is small, it is too frequent. It would have to be "once in awhile", practically unplanned, to qualify. Does that sound correct?The interesting thing is, the snacks are a truly unnecessary benefit and i know my employees would not choose to receive these snacks if they had to count them as income. So, essentially, this law stifles generosity and kindness. Or rather, it forces me as an individual to use my personal money for a business purpose. I guess nothing has changed.
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

Your thought pattern is correct, once a week would not be considered occasional. Are your providing the snacks for a business benefit or to be kind? The law doesn't stifle your generosity and kindness, you're just not able to benefit from the generosity and kindness. Respectfully, ***** ***** are truly providing these snacks to be generous and kind, spending your personal funds shouldn't be an issue.

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Customer reply replied 1 month ago
Providing snacks to employees is something I like to do out of kindness, but as i mentioned at the outset, it also has a business purpose of "promoting good morale". It would be an oversimplification to state that such an action is done either out of kindness or for a business purpose, like many things in life, it is a combination of both. The reason I have been spending my own money to do this, rather than say forget it, is because i don't mind doing so. However, in my point of view, it should be perfectly acceptable for a business (which is viewed as a "person", a separate entity in the eyes of the law), to do the same thing so long as it is not an "alternate way" to pay wages to employees or an "excuse" to pay them less, something only a shady business would do. I see nothing wrong with the business being allowed to use a very small portion of its resources to give to its workers without tax consequences. Businesses can conduct meetings with clients over a meal and count it as a deduction, even if it's not because of being generous but it simply benefits the business, can they not? Why have businesses become restrained from doing the same with its own employees? Essentially, showing hospitality has become a "privilege" extended only to humans, and business entities are discouraged from showing it. Since there is a component of business interest in providing snacks, saying that business owners and managers should feel free to spend personal money on employees, is asking individuals to use personal money for business purposes. It would be better i think, for the law to encourage business management to use company resources in a way that promotes a generous and happy spirit among its workers. I simply cannot fathom the purpose of making employees pay tax on snacks given to them, as no one wants to keep track of something like that. Nevertheless, we have no control over the way laws are written....
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

I understand and agree with your point of view, but the tax laws are what they are and as you wrote, we have no control over how they are written.

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Customer reply replied 1 month ago
I researched further about what is considered the "business premises" and the definition i saw on this irs website ( https://taxmap.irs.gov/taxmap/pubs/p15b-001.htm#TXMP656c685b ) is that it means the place where the employees perform their work. So it looks like the grocery store would be considered my business' "business premise" after all.However, the webpage also specifically mentioned that meals that "promote morale" are not excluded from taxation.I have a follow-up question regarding business meetings with employees. Can i provide snacks as part of a safety or other meeting with the employees? Can i have such meetings on a regular basis?I'd like to get another viewpoint on this topic, could i open this question up to another expert?
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

You can ask for a second opinion.

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Customer reply replied 1 month ago
I don't see an menu option for this, is there something specific i need to do for that?
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

I'm not sure how that works either. However, I have seen questions posted where people have asked for second opinions.

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Customer reply replied 1 month ago
Just answer says, "you can ask the Expert to opt out of the question and open it to other Experts". Could you find out how to do that?
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 month ago

I just received an email yesterday about opting out of questions, and that I should not do that unless necessary. However, I will opt out as it is per your request for me to do so.

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Tax Professional: Barbara, Enrolled Agent replied 1 month ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,807
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Different expert here - my name is ***** ***** I will be happy to assist you.

As you already know,

In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code.

The IRS has ruled previously in a particular case that items with a value exceeding $100 could not be considered de minimis, even under unusual circumstances.

Meals are excludable from wages of the employee if they are provided:  on the employer's business premises; and  for the employer's convenience. Providing meals at safety or other meetings with your employees is not taxable to the employees.

See the following: https://www.irs.gov/pub/irs-pdf/p5137.pdf

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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