IRS considers taxing work perks like food, gym memberships(foxnews.com)
foxnews.com
IRS considers taxing work perks like food, gym memberships
http://www.foxnews.com/politics/2014/04/16/irs-considers-taxing-work-perks-like-food-gym-memberships/
18 comments
These sorts of things are an unfortunate side-effect of the fact that individuals aren't allowed to write off their expenses as tax-deductible. Sort of how companies are allowed to write off their own expenses before calculating tax on "earnings".
So the market gravitates towards compensating employees in a tax-deductible sort of way.
So the market gravitates towards compensating employees in a tax-deductible sort of way.
Things like food and gym memberships are already taxed through goods and services taxes, at the time of purchase. This seems like double taxation to me. Plus, if I was an employer I would get around it by charging my employees a token 50 cents per meal or gym month, and writing the rest off as a business loss. Sounds like another way for the IRS to waste time and money on paperwork.
It's a tricky thing: Suppose you volunteer to run the phones for your local NPR funding drive. While you're there, they provide you with breakfast. Will it make our country better to tax the free food?
Food at work makes work more efficient. It may be a perk, but it's less portable than getting paid the street value of whatever food is provided. You can't take it with you, or use that food to earn interest, nor can you get it if you're not at work. You don't get to pick what food gets served or how much it costs, nor can you refuse it in lieu of cash.
There are valid arguments for taxing perks, but it's a tricky issue.
Food at work makes work more efficient. It may be a perk, but it's less portable than getting paid the street value of whatever food is provided. You can't take it with you, or use that food to earn interest, nor can you get it if you're not at work. You don't get to pick what food gets served or how much it costs, nor can you refuse it in lieu of cash.
There are valid arguments for taxing perks, but it's a tricky issue.
Last paragraph made me laugh:
"Even if the IRS does crack down on this perk, the high-tech lunch isn't likely to completely disappear. Legal experts suspect most companies will probably just report it as 'taxable income' to employees and then pay them more in salary to cover the cost."
Written by someone who has probably has little experience in the real world.
"Even if the IRS does crack down on this perk, the high-tech lunch isn't likely to completely disappear. Legal experts suspect most companies will probably just report it as 'taxable income' to employees and then pay them more in salary to cover the cost."
Written by someone who has probably has little experience in the real world.
Mangaement:Quick accounting! This is a huge deal for IRS this year I read about it in the WSJ. Get this, they are going to start taxing employees for the gourmet meals. Don't give me that look - Of course ... we ... will ... reimburse our employees for this.
Accountant: So... for every employee we need to do an infinite sum series for a given taxable income based on the fair value of how much they have eaten...
Management: Ewwph. Huh?
Accountant: We don't even track this yet...
Management: We'll take what we pay on food and divide by the employees
Accountant: This would create a tragedy of the commons scenario that will destroy morale...
Management: Ewwph... how... we weigh each employee before and after they enter and exit the building AND restroom and find their weight differential. Then we apply that to a $/weight_delta factor to get their taxable income!!
Accountant: No ... Fuck no.
Management: Then how about we make employees pay for their meals and then reimburse afterwards like we do with our expense reports! So simple - literally just thought of that.
Accountant: Most sensical thing you said today, but accounting would collapse under the weight of all of those expense reports.
Management: Spoil sport. No more free lunches.
Accountant: So... for every employee we need to do an infinite sum series for a given taxable income based on the fair value of how much they have eaten...
Management: Ewwph. Huh?
Accountant: We don't even track this yet...
Management: We'll take what we pay on food and divide by the employees
Accountant: This would create a tragedy of the commons scenario that will destroy morale...
Management: Ewwph... how... we weigh each employee before and after they enter and exit the building AND restroom and find their weight differential. Then we apply that to a $/weight_delta factor to get their taxable income!!
Accountant: No ... Fuck no.
Management: Then how about we make employees pay for their meals and then reimburse afterwards like we do with our expense reports! So simple - literally just thought of that.
Accountant: Most sensical thing you said today, but accounting would collapse under the weight of all of those expense reports.
Management: Spoil sport. No more free lunches.
I do find it amusing that legal experts were consulted for their insight on business and economics.
Is there anything this country does not want to tax?! How much more burden can we take?
This is not something new the government is taxing, it's just extending the income tax from 'all income paid in money' to 'all income paid in money, goods and services', which is reasonable since money is just a proxy for 'all the things you buy with money', like food or gym memberships.
Although I doubt this story is particularly true, if the reduction in pay is roughly equivalent to the cost of food otherwise, employer-provided food is likely still a net-benefit (if you often bring food from home this decreases for married couples, strongly decreases with children). If the food is provided to you at no cost but offsetting some salary, then you're at least preventing the government from double-dipping your taxes for those meals; you wont pay the sales tax on the food.
Are you going to tax me for the time my employer's offices provide me shelter at my job?
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They already do tax laundry. At Facebook and Palantir, last I heard the laundry is paid for by the company, but it's considered a fringe benefit, and employees who use the service have to pay the taxes on that extra income.
The IRS taxes compensation.
It's hard to believe it has taken them this long to realize that hundreds (or thousands) of dollars in free food and perks a month is compensation.
It's hard to believe it has taken them this long to realize that hundreds (or thousands) of dollars in free food and perks a month is compensation.
There's an acronym for that: BIK
Benefit in Kind
And is taxed in some countries (to some extent) like Ireland and Germany
Benefit in Kind
And is taxed in some countries (to some extent) like Ireland and Germany
They are not, if they are meant to make you work harder. Eg. if you have free food/coffee at work, and you eat in, then you have more time to do work/more productive.
If your team decides to have an "offsite" at a restaurant/event, should that be taxed as well?
It just goes through a slippery slope that you view anything that a company provides as taxable. I think it would be a very short sighted decission to squeeze few dollars on the short term, for long term loss on overall productivity.
If your team decides to have an "offsite" at a restaurant/event, should that be taxed as well?
It just goes through a slippery slope that you view anything that a company provides as taxable. I think it would be a very short sighted decission to squeeze few dollars on the short term, for long term loss on overall productivity.
> The IRS taxes compensation.
source? genuinely curious if those words are written somewhere.
It would seem to me that the IRS should tax income, specifically income that I can use to pay taxes (or which can reasonably and reliably be converted into something that I can use to pay taxes).
I'd love to send 40% of last week's corporate-paid lunch to the IRS but my guess is they wouldn't accept it.
source? genuinely curious if those words are written somewhere.
It would seem to me that the IRS should tax income, specifically income that I can use to pay taxes (or which can reasonably and reliably be converted into something that I can use to pay taxes).
I'd love to send 40% of last week's corporate-paid lunch to the IRS but my guess is they wouldn't accept it.
source? genuinely curious if those words are written somewhere.
IRS Publication 525 -- "In most cases, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options."
It would seem to me that the IRS should tax income, specifically income that I can use to pay taxes (or which can reasonably and reliably be converted into something that I can use to pay taxes).
I'd love to send 40% of last week's corporate-paid lunch to the IRS but my guess is they wouldn't accept it.
You can't send the IRS 40% of a fully paid vacation to Hawaii, including use of the corporate jet either. Should companies be able to give their employees such vacations without out the employee being required to pay taxes on the value?
Think about what incentives that would create -- individuals could evade taxes altogether by simply negotiating with their employer to provide whatever goods and services they wished to consume rather than money. And because such benefits wouldn't make up part of the AGI the individual would also be eligible for government social programs.
IRS Publication 525 -- "In most cases, you must include in gross income everything you receive in payment for personal services. In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options."
It would seem to me that the IRS should tax income, specifically income that I can use to pay taxes (or which can reasonably and reliably be converted into something that I can use to pay taxes).
I'd love to send 40% of last week's corporate-paid lunch to the IRS but my guess is they wouldn't accept it.
You can't send the IRS 40% of a fully paid vacation to Hawaii, including use of the corporate jet either. Should companies be able to give their employees such vacations without out the employee being required to pay taxes on the value?
Think about what incentives that would create -- individuals could evade taxes altogether by simply negotiating with their employer to provide whatever goods and services they wished to consume rather than money. And because such benefits wouldn't make up part of the AGI the individual would also be eligible for government social programs.
Perhaps you could you all the income you save from not having to buy lunch to pay said taxes.
How do you know how much I would have spent on lunch? Or if I would have spent anything at all?
If I work at a company that offers free food but I don't eat anything did I receive taxable compensation? If the company offers me a bonus and I never cash the check I never get taxed on that money.
I'm not sure how the IRS could possibly assign a compensation value to individuals. One method might be to make the costs of these perks non-deductible from a company tax perspective.
I'm not sure how the IRS could possibly assign a compensation value to individuals. One method might be to make the costs of these perks non-deductible from a company tax perspective.
It hasn't. Fringe benefits are already taxable. What they are talking about is conducting audits to enforce the existing tax code, based on information that employers and/or workers may not be paying the taxes they owe on these fringe benefits.
The income tax is meant to model: http://en.wikipedia.org/wiki/Haig%E2%80%93Simons_income. Income = consumption + delta(wealth).
Free food is literally consumption, and falls within the umbrella of the tax. Heretofore, it has been ignored as de minimis, but the principle always applied. E.g. if companies could get away with giving non-cash compensation like cars on a non-taxable basis, they would.
Free food is literally consumption, and falls within the umbrella of the tax. Heretofore, it has been ignored as de minimis, but the principle always applied. E.g. if companies could get away with giving non-cash compensation like cars on a non-taxable basis, they would.
How would the gov't deal with a heavily subsidized cafeteria? Let's say employees are only pay 30% of the real cost of supplying the food?
I work for a Bay Area company that has a very conservative interpretation of this "extra perks as compensation which is taxable thing". Yes, gym memberships and lunch are counted as taxable compensation. And no, our company does not "gross up".
It's a marginal cost per day/month, and frankly speaking, most of the people at the company can afford it.
It's a marginal cost per day/month, and frankly speaking, most of the people at the company can afford it.
Already happens in the UK. Most things (with some exceptions, but most things) that used to be a perk are now taxable as income (or benefit-in-kind). Health insurance, cars, food (if it's full meals) etc. etc.
Mostly it just means that the people at the top of the chain can no longer abuse the company purse to do what the f* they like, as used to happen in the 80s...
Mostly it just means that the people at the top of the chain can no longer abuse the company purse to do what the f* they like, as used to happen in the 80s...
Never in my wildest dreams would I have thought foxnews of all places would be on HN...
Im a right leaning, financial conservative libertarian, but gosh. I am impressed.
Im a right leaning, financial conservative libertarian, but gosh. I am impressed.
if companies make lunches for token values say oh 1$ then it would become night marishly hard to figure out real value of those lunches, to tax on the difference. What is real is the external debt - the reason IRS is working over time, 15 trillion of it around 95% of GDP is the reason for IRS becoming more aggressive with collections, IMO.
my 2c
my 2c
The companies could have not conspired to keep salaries down and the people could buy things with their own money.
Good. There is no reason to not treat compensation equally.
Next up: Capital gains's different tax rate.
Next up: Capital gains's different tax rate.
"IRS begins new PR campaign to solicit donations from Silicon Valley for politicians on tax policy committees."
Would gym "membership" at a company owned and operated gym be taxed? What about "membership" to other company owned and operated 'perks', such as access to a woodworking shop at a tech company?
It's just FUD clickbait, like a great many 'news' articles published at tax time. Consider the source.