Two minor questions

[Questionguy101]

(1) Owner is one of two employees of a S-corp. Owner (as an employee) has to stay late in the office during the busy time in order to finish his works. He gets a monthly salary and no overtime is paid. When he has to stay late to work, he has his dinner at the office. Can the company reimburse his expense for the dinner? Would the reimbursement be taxable to him?

(2) Company purchases beverages and snacks and all the employees can consume them whenever they need. Is the cost of the beverages and the snacks deductible business expense? Would the cost of the beverages and snacks be taxable to the employees if they consume it?

Thank you.

[erchess]

1. The S Corp may certainly reimburse any employee including an owner for meals consumed on the premises of the employer for the convenience of the employer. It's a nontaxable fringe benefit if there is an accountable plan or if the company simply pays for the food or in this case the owner simply pays for it with funds that have not been pulled out of the S Corp. (I don't see the benefit of the owner paying for the food with personal funds then jumping through the hoops of an accountable plan so as to reimburse himself tax free when he could simply pay for the food with S Corp Money and report it as an expense of the S Corp He gets to eat the same bucket of honey bbq chicken wings (or whatever) either way.)

2. Drinks and snacks on premises for all the employees paid for by the company would be a nontaxable fringe benefit as well.

[Questionguy101]

1. The S Corp may certainly reimburse any employee including an owner for meals consumed on the premises of the employer for the convenience of the employer. It's a nontaxable fringe benefit if there is an accountable plan or if the company simply pays for the food or in this case the owner simply pays for it with funds that have not been pulled out of the S Corp. (I don't see the benefit of the owner paying for the food with personal funds then jumping through the hoops of an accountable plan so as to reimburse himself tax free when he could simply pay for the food with S Corp Money and report it as an expense of the S Corp He gets to eat the same bucket of honey bbq chicken wings (or whatever) either way.)

Thank you for your reply erchess.

As for the 'for the convenience of the employer', the employee would usually not be doing works (may be sometimes take a phone call) when eating his dinner even though it is at the premises of the employer. But he would start doing his works again immediately after the dinner though. Would you consider it 'for the convenience of the employer' in this case?

Also, does it make a difference if the employee goes out to have his dinner (instead of at the premises of the employer) and then immediately comes back to continue to work after it?

[Gretel]

Thank you for your reply erchess.

As for the 'for the convenience of the employer', the employee would usually not be doing works (may be sometimes take a phone call) when eating his dinner even though it is at the premises of the employer. But he would start doing his works again immediately after the dinner though. Would you consider it 'for the convenience of the employer' in this case?

I don't anyone would think that employee should work while eating. I think 'for the convenience of the employer' means mainly not to loose any additional time besides eating.

[/QUOTE]
Also, does it make a difference if the employee goes out to have his dinner (instead of at the premises of the employer) and then immediately comes back to continue to work after it?[/QUOTE]

See above. Yes, it makes all the difference.

[erchess]

TTB SB 7-6 and 7-7

contain all you need to know.

Be sure to read what it says about when the meals count as for the convenience of the employer. And yes to be a fully deductible expense the food has to be consumed on premises but there is no reason I can see why the boss or someone else whether they are or are not going to eat the food can't leave to go get it. But meals consumed off premises are at best only half deductible.

So in short any reimbursement (or the company paying for) for over half of the cost for an off premises meal is taxable but the reimbursement (or company paying for) can be tax free and in full if the meal is on premises AND that fact is for the convenience of the employer.

[Questionguy101]

Thank you erchess and Gretel.

You guys' replies are detailed but also very concise.

[Davc]

What is the business reason that makes it for the convenience of the employer?

[ChEAr$]

Whew!

(snippped...)

2. Drinks and snacks on premises for all the employees paid for by the company would be a nontaxable fringe benefit as well.

Thank God for that. Occasionally I may not even have a client in the office during a morning to help me drink that gourmet coffee that smells so good.

[thomtax]

What is the business reason that makes it for the convenience of the employer?

To get necessary work done. If you spend 1 - 2 hours going somewhere else to eat, then I figure what is the sense of going back after all that time.

LT

[Davc]

To get necessary work done. If you spend 1 - 2 hours going somewhere else to eat, then I figure what is the sense of going back after all that time.

LT

Yep, that would be inconvenient for the employee.

[thomtax]

Yep, that would be inconvenient for the employee.

If it becomes too much of an inconvenience to the employee that he decides not to return and the extra work does not get done, it naturally follows that the employer is inconvenienced by the work not being done. Enough work does not get done, customer service falters.

[Davc]

You might want to look at some court cases. "Convenience of the employer" is never an easy hurdle and when the employee in question is an owner the IRS will view the situation with a decidedly jaundiced eye and so will the courts.