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Discussion Forum Index --> Tax Questions --> Are food allowances taxable?
Tonster (talk|edits) said:
| 26 April 2006
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| if a company requires an employee who travels from client to client to eat at restaurants in between stops and provides him with a food allowance each week, does the employee include the food allowances in gross income? my gut instinct tells me that since he is required to eat those meals, then it should be excludable, but i could be wrong.
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AJS (talk|edits) said:
| 26 April 2006
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| I think it should not be taxable
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Tonster (talk|edits) said:
| 26 April 2006
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| does something like this qualify as a tax-free fringe benefit?
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Bengoshi (talk|edits) said:
| 26 April 2006
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| My understanding is that under IRC Sec. 119, the employee would include such fringe benefits in his/her gross income. Sec. 119 excludes from an employee's gross income the value of meals, provided its for the employer's convenience AND its furnished on the employer's business premises. Here, it sounds like the employee is not on the employer's business premises (although it may be for the employer's convenience).
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Bengoshi (talk|edits) said:
| 26 April 2006
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| Also, you can see Treasury Reg. 1.119-1 for a definition and examples of "business premises of employer." Generally, it means "the place of employment of the employee." (okay, maybe that definition isn't all that helpful).
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Dennis (talk|edits) said:
| 26 April 2006
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| I think you're overlooking the employer's responsibility. This sounds like something that should have been included in W-2 income.
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Riley2 (talk|edits) said:
| 26 April 2006
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| The food allowance is fully taxable unless the employee is away from his "tax home" and the trip involves overnight travel.
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Tonster (talk|edits) said:
| 26 April 2006
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| Would it be fully taxable because it does not fall under any of the code sections? I mean he is not away from his tax home on travel, so the ability to deduct the meal expenses is nonexistent. The meals are not served as part of a cafeteria plan (at least i don't think so) nor are they served on the employer's premises thus they should not be considered a fringe benefit. The thing that bothers me and prevents me from thinking it is part of gross income, is that the employer requires the employee to eat in between stops on his shift.
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Jdugancpa (talk|edits) said:
| 26 April 2006
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| Maybe the employer requires him to wear a suit and tie. That doesn't make the suit and tie deductible.
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Tonster (talk|edits) said:
| 26 April 2006
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| so if the food allowances are to be included in gross income, can it be subject to any sort of deduction or expensing?
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Jdugancpa (talk|edits) said:
| 26 April 2006
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| Food might be deductible on 2106 for trips out of town overnight or business meals where a customer or client or other business associate is present and the meal meets the requirements for M&E deduction. Otherwise, it is includeable in gross income with no deduction.
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Tonster (talk|edits) said:
| 26 April 2006
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| so what is the best way to reason that the food allowances are included in gross income? should it simply be classified as a fringe benefit, but one that is taxed?
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Albundy (talk|edits) said:
| 26 April 2006
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| I think everyone is missing it. It sounds like an expense reimbursement under an Unaccountable Plan. As such, it should be included with W-2 Income the same as a Car Allowance is. If the expenses are legitimate business expenses, he can use Form 2106 to claim a deduction. But, we all know that isn't favorable. If they don't like that, then have them actually reimburse him for the actual business expenses. That way, its not Income to him and the employer gets the expense deduction.
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Tonster (talk|edits) said:
| 27 April 2006
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| so basically this should be viewed as a form of reimbursement and not a "meal expense" (since most clauses about meals pertain to meals during business travel and the like)?
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Albundy (talk|edits) said:
| 2 May 2006
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| I know its been awhile since I visited the site - sorry. Start with Publication 463 - It's written in English & not IRS Code Lingo. It also gives a good definition of what meals are deductible as business expenses. If the meal expenses qualify as legitimate business expenses, then they can be deducted by whoever pays them, subject to the 50% limitation. From the Employer's Point: If they just pay the Employee an allowance without regard to the actual expenses incurred and the Employee doesn't have to account for them, then the amounts should be includable in his Income as Wages. Here its subject to payroll and employment taxes. If they just reimburse him for actual documented expenses, then its not Income. There are Standard Meals & Incidentals amounts allowed for which no receiots are necessary. However, you need to be able to prove that there was a business reason for the meal and that the employee was actually there. For example. a vehicle log would prove that Employee A was in Houston, TX on 9/13/05. The amount allowed for Meals & Incidental Expenses on that day would have been $47. The Employer could deduct that amount with no receipt being necessary. From the Employee's Point: About the only difference is that if the Employer includes the amounts in his Gross Income, he can deduct the eligible business expenses. He also has the choice of actual amounts versus per diem amounts.
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Mr. CPA (talk|edits) said:
| 3 May 2006
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| Albundy took the words right out of my mouth. There is your answer Tonster.
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