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back to article Tax man to take a bite of tech employees' free meals?

The free meals doled out by Silicon Valley titans such as Facebook and Google may soon carry an additional burden for employees: the US Internal Revenue Service (IRS) is reportedly weighing whether to count them as income for tax purposes. The agency itself is keeping mum on the topic, but The Wall Street Journal cites tax …

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Misleading Headline?

Only applies to one of the old colonies. Should say so.

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Re: Misleading Headline?

This missive is long, so please, if you like 'em short, don't read it and downvote me on that basis. Please?

Maybe Google can band with larger companies to buy raw food in a HUGE bulk discount, then make the employees "club members", a la Costco, and then charge the employees just one penney above or one penny below the lowest price that be demonstrated as the final "price" of the food.

That might be cheaper than just paying for all the employee's provided/subsidized, current-price meal costs.

As for restaurants providing free (or, low-cost in some cases) meals to employees, for convenience, and exempted because the meals are a matter of convenience to the employee and are eaten on premises, well, those meals are a convenience for the employer, too. If employees go eat off premises, they may return late, and mess up meal and rest break cycles. I once worked in a restaurant in SF, and on my first day, I was EXHAUSTED. So, on my 1-hour lunch, I took a 45-minute nap in the car I borrowed from a housemate. When I returned, the manager and asst manager told me I could NEVER take my lunch or take a nap away from the diner. I was like "WTF", that ought to be grounds for lawsuit and termination of their operating permit.

As for the cost of the food, it doesn't kill the restaurants. It's cheaper because it is a cost differential to lure and retain employees who often take shitty wages in return. Some restaurants DO charge employees, however.

But, in the case of hi-tech, why cannot the IRS just give it a rest? It is bad enough that "subjec...", umm, tax-duty-bound citizens and residents of the USA are subject to income and other taxes WORLDWIDE. I hate that, because not only does it "legally" affirm/confirm/demant that we have to accept being "subjects" of a country, we cannot just be "stateless" and pay taxes to where ever we happen to reside. To be intellectually honest, I do know that in the case of a country having reciprocal reporting proceduress with the USA, a USA (and vice versa) citizen who pays local taxes up to a certain wage/salary level can or usually is exempted from simultaneously being taxed in the USA, in effect, the subjec... Umm, citizen is spared from being speared by double-taxation.

If the IRS wants to do the public and itself a favor, CLEAN UP the FUCKING TAX CODE!!! Look at Singapore. One of my friends residing in the US and paying taxes in the US on his US-based income had to report to Singapore. He logged in, reported, and was finished in about 5 MINUTES! I've read online in other cases, that even for domestic Singaporeans, filing taxes is a 5-minute event. Maybe it is due to the tax authorities having a more sane level of knowledge and stiffer repercussions for tax cheats. But, the current USA tax system is shitty, broken, and is mostly nowadays a cottage/chattel industry-maker for tax preparers who really for the most part should not be needed.

I want to have my return be something like:

-- Log in with my credentials, whether from home, a bank, a library, the DMV, wherever my identiy is verifiable.

-- Authenticate with my thumb print

-- Verify that I 1, 2, or whatever number of joobs

-- Verify that I agree with the tax levied based on the allowed exemptions/claims/deductions/etc

-- Confirm agreement and accept perjury warnings

-- Verify my bank or Pay-Pal-like non-bank debit card (why cannot such a card exist for verified individuals?)

-- Sign off

-- Two hours later, find my tax returns or tax debt deposited or removed (or levied against me to be deducted from future income or payroll)

SOOOO goddamned easy. At least for people who have zero or some small number of simple investments that effectively produced no large differential in base income to investment income.

Oh, and when the government miscalculates and over-refunds people or fails to properly collect on taxes due, too bad. Take the good with the bad.

I want it to get to the point where I do not even have to THINK about filling. But, see, along with mandatory filing (even if no tax is owed), just as with global taxation, such policies make it possible for:

-- governments to control their "subjects"

-- keep a quasi census of at least employed or income-generating people

-- mounting expeditions to "rescue" "taxpayers/citizens" who voluntarily CHOSE/CHOOSE to work abroad

I know there are easy tax forms (1040 EZ, 540 EZ, etc), but to force people to go through this when many may not want to audit the IRS' work just makes them "feel as if" the government is not "watching too closely". I don't dodge owed taxes, and though I'm deep in debt, I don't dodge or seek dodgy tax havens. My picture should be siimple enought thumbprint in, say yes or no to the numbers and fact/assumptions, and be done in FIVE minutes if no glaring mistakes are present.

Now, if only 272 million taxpayers all in unison DEMANDED what I just wrote, then the fat, lazy, corrupt obstructionists in office would have to listen. As long as people don't, then many will buy and play with tax preparation software to feel good or to monitor their portfolios and status.

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Re: Misleading Headline?

When our coffee machines were switched to 'free vend' I was told that technically, I should declare all the cappuccinos I've had over the year for tax purposes!

This was in the UK

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Re: Misleading Headline?

Yep...been there and when I mentioned it to a colleague he didn't believe me so phone the Taxman to ask them directly???????

Muppet

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Re: Misleading Headline?

@dssf - benefits that have a significant cash value should be counted as income and taxed as such, simple.

Yes, the tax code should be simplified, and filing should be automated, but that's not what this article is about

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Anonymous Coward

Oh, working around that one is easy

1. Buy the meals from your off-shore subsidiary at a rock bottom price.

2. Sell the meals to your employees at cost.

3. Then write off your subsidiary's loss against this years tax bill.

4. Take the money for the tax rebate from your loss making subsidiary and pay a small annual performance bonus to each employee who uses the company canteen, probably equal to the paltry amount you're charging them for their meals.

Did I miss anything? I was looking at the Starbucks playbook and reckon I'm a quick learner 8-).....

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Headmaster

Did I miss anything?

Yes.

The 'workaround' you describe is a recipe for insolvency.

The subsidiary's 'loss' is a cash loss that needs to be funded either from shareholders' funds or from debt.

Assuming you can 'offset' the losses of a foreign subsidiary against the taxable gains of a domestic entity (which is not always the case), then the next hurdle is to have sufficient domestic taxable gains to absorb the losses.

If there isn't enough gains then you need to be able to carry forward the losses into the next tax year (again, this is not always allowed). You then need to ensure you make sufficient gains to absorb the carried-forward foreign losses.

Assuming you get past the above, then you'll soon realise that you're still left out of pocket. This is because in 'offsetting' a loss against a gain, all you're really doing is saving the tax that you would otherwise pay on the gain. For a corporate tax rate of 21%, this means that for every £1 in cash you lose (and offset against a gain), you only get 21p back (being the 21p of tax you'd other pay on the £1 gain). Your net position is cash neutral.

Factor in the effect of any withholding taxes on dividends and interest and the scheme you described soon sees you slip into the red.

Repeat it enough times and you'll soon be broke.

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Facepalm

Re: Oh, working around that one is easy

And following step 4, your employees will be taxed on the cash bonus, instead of being taxed on the food benefit, as the IRS is proposing... and that the company has jumped through a whole lot of hoops (steps 1,2,3) to achieve exactly nothing

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Unlikely

People don't realize it but the IRS discusses stuff like this all the time. I guarantee you they've discussed free coffee at some point. Almost all of these conversations are non starters though as the actual income generated via taxes would nowhere near exceed the political fallout of taxing free food.

Sounds like an accounting FUD ploy to me.

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Re: Unlikely

I can see the IRS on the phone to Congress right now..."Deploy the FUD, Mr Prez".

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Excuse me?

" And I have to pay taxes to support free meals for those Google employees,"

Martin McMahon, Jr., a tax-law professor at the University of Florida,

And who is paying the salary of a professor at University of Florida? = all those high earning programmers at Google

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WTF?

Re: Excuse me?

> " And I have to pay taxes to support free meals for those Google employees,"

I don't get this reasoning anyway.

In what way does this guy think that he is paying Google employees anything?

Is he really saying that he has to pay more taxes because Google employees are "allegedly" paying less by not paying tax for their free meals?

That's pretty stupid logic. You might just as well say that he's paying for my laptop provided by my work for my use at work. It's not taxable, but "if it were", then he is subsidising my work laptop.

You might also argue that Google employees shouldn't have to pay tax on their free meals, to decrease his tax bill.

What a tw*t.

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Re: Excuse me?

Is he really saying that he has to pay more taxes because Google employees are "allegedly" paying less by not paying tax for their free meals?

It seems pretty clear cut to me. His argument is essentially "If you don't pay the tax that you are supposed to, but I do, I have to pay more tax to make up for the tax you didn't pay." Do you argue that tax evasion and benefits fraud are victimless crimes? Who do you think ends up paying the bill?

Your analogy with your laptop is a poor one. It is a tool provided by the company for the purposes of carrying out the company's business - if it was not for that employment you would not need access to the companies systems, applications and so on. Food is a personal rather than employment expense: if you quit your job you still need to eat.

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Re: Excuse me?

Even state-owned universities in the US get most of their income from tuition fees, endowments and alumni. Very little state subsidy - it's anti free market, you know. What there is tends to be in the form of grants for specific research projects in the same way as many companies sponsor research.

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Re: Excuse me?

No, Mr McMahon, you have to pay taxes to support a pathetic, useless, wasteful, unfireable bureaucracy filled with people who are worth less than the price of their constituent atoms ...

... said the guy who owes the federal government enough to pay for a two week European vacation come April 15.

Sir Humphrey put it best: the government figures out how much they can get then decides how to spend it. And to be honest, I think it's even worse than that.

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Re: Excuse me?

"It seems pretty clear cut to me. His argument is essentially "If you don't pay the tax that you are supposed to, but I do, I have to pay more tax to make up for the tax you didn't pay." Do you argue that tax evasion and benefits fraud are victimless crimes? Who do you think ends up paying the bill?"

Does anyone honestly think that paying income tax on the "free" grub which, in California where Google, Apple, et al. are located, is subject1 to sales tax will actually produce a change in the tax code such that Mr. McMahon will ever see a difference? All it does is take a few more dollars out of some poor coder who has to suffer with California's insane tax code as well as Uncle Sam's.

1. In general prepared food is subject to CA sales tax but like everything in California it is far beyond overly complicated in that it varies depending on whether it is hot or cold, liquid or solid, baked or fried, how it was prepared, what the reading was from both the tea leaves and chicken bones used, etc. etc. ad infinitum.

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Re: Excuse me?

About the laptop analogy... let's try another one: whether I'm employed or not, I still have to use the loo. Then, from your point of view, I should be taxed for using it, right? So, what's your take on this now?

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FAIL

Re: Excuse me?

> About the laptop analogy... let's try another one: whether I'm employed or not, I still have to use the loo. Then, from your point of view, I should be taxed for using it, right? So, what's your take on this now?

The point is that all sorts of things "could" be taxable.

Just because someone out there is getting something for which they are not taxed currently, doesn't make them tax cheaters and it doesn't mean they are being "subsidised" by other tax payers.

The whole point this lawyer is making is bollocks, and I'm sorry that you guys can't understand that.

It's a strawman argument.

What he is saying is that if these people were paying tax for the meals that Google is providing, then perhaps his tax bill would go down because they were paying more therefore him less. Quite apart from the fact that taxes only ever go up, not down as any fule no, they would now be "subsidising" him. Quite an extraordinarily dense guy, I'm surprised that he passed his bar exams.

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Re: Excuse me?

> Food is a personal rather than employment expense: if you quit your job you still need to eat.

You make a good argument that the food*should* be taxed as a benefit.

However, since it is not currently, then your point is rather moot.

My point was about the fact that the lawyer was talking out of his arse, rather than the "moral" aspects of whether they should be paying tax or not on that food.

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Re: Excuse me?

About the laptop analogy... let's try another one: whether I'm employed or not, I still have to use the loo. Then, from your point of view, I should be taxed for using it, right? So, what's your take on this now?

You are taxed for using the loo. Get a new loo or bathroom installed and it will come out of your taxable income and the bill will be subject to VAT - you are actually taxed twice. You are not taxed for the toilet at work which is needed solely in connection with your employment.

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Devil

Re: Excuse me?

Laptop doesn't count because it's used for work. Food counts because you have to eat whether you work or not. Loo, yes, you have to go whether you work or not BUT it has no cash value because typically there is no cost to spending a penny (or a pound)

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Re: Excuse me?

Actually in many cities where they are separate, the sewer bill often exceeds the cost of the water bill. I suppose if you have the resources to have a septic drain field and a well then it only incurs electrical costs and the maintenance.

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Happy

"interact with food"

How very 21st century - you maybe mean "have a bacon roll"? Actually - wtf - how many times is a bacon roll taxed?

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Depends on the country

Here in Switzerland, free employer food is already counted as income, and taxed as such.

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Re: Depends on the country

Canada too, and has been for decades. In a nutshell - and really it's kind of obvious - anything that the employer gives you is considered to be compensation for your employment.

Could be money, a Christmas bonus, an expenses paid vacation, bags full of acorns, lunches and dinners... it doesn't really matter. If you get some value from your employer, it's taxable.

Well, except for all of the Post-It notes and Scotch tape that you bring home....

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Re: Depends on the country

Where do I have to work to gt these bags of acorns?

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Re: Depends on the country

'Tis in The Netherlands too. To compensate for the food, tea, coffee, soft drinks and Friday drinks I have 42 euros added to my salary before tax (the tax man decides the amount).

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Re: Depends on the country

Makes sense really.

Look at it this way taken to the extreme - what if Google provides all it's employees with an on-campus apartment or in their own little Googleville, a Google car (possibly self-driven), plus free food / drink in any restaurant / bar etc in Googleville, free access to cinemas in Googleville, free or susidised stuff from Google stores etc etc.... basically cover what constitutes 60-70% of their employees' expenses and pay them in cash only a tiny amount.

Should Googlers only pay tax on the cash portion of what they get (at which point it's either completely exempt or else taxed at the lowest rate)? No, it makes sense to be taxing them on the sum total of everything that constitutes their pay packet i.e. anything that (a) has cash value and (b) is not used for work.

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So how does it work?

Would you give the tax man a few chips? I have an idea, rather than pay the tax man money, I'll use a small amount of that money to buy potatoes and oil, make chips, by which time the value of the potato will have increased (after all chips are more expensive than potatoes) and I can give the tax man the chips and keep the rest of the cash. How does this affect soup kitchens? Will the destitute be required to fill out tax returns for the soup they consume?

How about if the tech companies opened up their canteens so that anyone with access to the site could get free food - employees, contractors, customers, tax inspectors. If it is available to anyone, then it is not a staff benefit - at least, not any more than using the loos or breathing the air conditioning is.

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Anonymous Coward

"how Googlers interact with food" ...

I invoke rule 34 and invite you to contemplate this image while having lunch ...

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WTF?

Turns out

There is no such thing as a free meal!

They will be charging you to use the loos next.

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Re: Turns out

The loo will still be free. Toilet paper and hand sanitizer will be taxed.

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Mushroom

I bet...

...the meal(s) provided for one D Hartnett by Vodafone inter alia were never taxed as benefit in kind...

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Re: I bet...

Does this mean the Obamas have to pay taxes on the whitehouse kitchen?

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Perfectly Normal for this to be taxed

However, it's usually the employer that settles the bill by coming to a sensible arrangement with the tax man (it's impractical to expect 000s of employees to manage it at the $10 level; much easier to account for it at the $m/$b corporate level).

Here's how HMRC do it:

http://www.hmrc.gov.uk/payerti/exb/schemes/psa.htm

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FAIL

Re: Perfectly Normal for this to be taxed

Erm,

No, here is how HMRC actually handle it

http://www.hmrc.gov.uk/manuals/eimanual/EIM21671.htm

They don't tax it, at all, assuming is is provided completely free of charge (and not via some kind of opt in , salary sacrifice scheme) and is available to all employees, and not some kind of banqueting club.

I do like the special exemption for directors to have better meals and wine while the plebs get bread and stew

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One other thing

Someone I work with has some food allergies and if we did have meals, he wouldn't be able to have 90% of the stuff catered in. Would he have to pay tax anyway?

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If you attract employees with free food

then all you'll get is hungry candidates.

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Next thing you know...

The IRS will state the value of the meal at $1000 a day (after all it is a gourmet meal!) and given that you will probably work Google for about 250 days a year, that puts your income at $250k that you will need to pay additional taxes for. All of a sudden you are "rich" and your tax rate is huge, and you will need all your "normal" income to pay for it. Then you won't have nay money left over for housing (Google might provide that as well), and then you will have no disposable income to buy things like clothes and Motorola Mobility phones.

So you will end up being a slave to Google just to pay the taxes.

What a country!

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Boffin

This is a bit of a slippery slope.....

If you tax employee's everyday meals at Google, does your usual company that occasionally brings in lunch or hosts a dinner to say thank you to employees also have to tax that? That would be a pain in the butt if every time somebody held a team luncheon you had to declare the spending taxable income.

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Anonymous Coward

Re: This is a bit of a slippery slope.....

probably technically yes. But from an accounts administrative angle pointless to do the paperwork for a few sandwiches a couple of times a year. Though if I recall in the UK, there is an per-head allowance to cover things such as the "Christmas Meal".

But for Google doing it day in day out all year round, yes. Or deduct it from their wages as "mess bill" or similar.

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Of course food should be taxed. It's a benefit in kind, and would certainly be liable for tax in the UK.

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Anonymous Coward

Once again, here in asia

People get on with their work and free food is free.

How far will the draconian tax rules in the US (and often the UK), have to go before tax avoidance is the name of everyone's game, not just those smart enough to understand it.

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Stop

What's next?

Why don't they start charging a tax on the water people consume in public toilets? Makes about as much sense, but you watch it's coming!

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I used to think that all employer provided snacks and meals were tax-dodging perks.

Then I saw an excellent example of how meals can be "for the employers convenience".

I got to see the production village of a Formula One race. They flew in a cafeteria. On a 747. Including chefs and gourmet food (although the those didn't fly on the cargo jets). Hugely expensive. It probably cost them $100 per meal. Perhaps even $500.

The alternative was having the crew go out and buy their own meals locally. But the area surrounding a F1 race is a full time traffic jam that would result in a 6 hour lunch and a 8 hour dinner, just when you needed them to be working 16 hour days.

It suddenly made sense why sometimes meals are not a "perk", and why taxing on the meal cost would sometimes be absurd.

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Meh

Keeping the techs on campus

I once worked at a large telecommunications company as a rent-a-programmer. We were quartered in a warehouse about a half mile from nowhere in New Jersey. They served (well, left for us in the printer room) free Danish and coffee. This was clearly to prevent us from going on a break with our cars. That is entirely for the convenience of the employer.

Locating one's data center in the back of beyond is a strategy for 1) getting cheap land to build on, and 2) making it likely that your staff will never take a substantial break or meal, but will work right through.

Taxing us for the break room would have been just the worst.

By the way, in the US the employer's contribution to health insurance and other benefits is tax free. The IRS is looking into a way to make it taxable, of course. Right now it is only taxable to the gay spouse!

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Re: Keeping the techs on campus

In both the case of the F1 teams and the data centre, and also the case of restaurants mentioned in the article, the free meals are a convenience for the employer and therefore not taxed. In Google's case this doesn't apply

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WTF?

Wow

Didn't realise the USA was THAT skint

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Unpleasant

"Martin McMahon, Jr., a tax-law professor at the University of Florida..."

Ah, a parasite on the parasites!

"So nat'ralists observe, a flea

Hath smaller fleas that on him prey;

And these have smaller fleas to bite 'em.

And so proceeds Ad infinitum."

- Jonathan Swift

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Coat

Sounds like Google Employees Need...

...a suitable tax dodge.

It needs a relevant name - "Double Irish & Dutch Sandwich" perhaps?

People always say you only rent beer - surely you could make an argument for leasing food in the same way?

Eat your lunch, and take a dump in an IRS-approved toilet for later inspection by the authorities to prove nothing valuable has left the building?

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