Are Employees Meals paid by the owner a business expense?

[Gildardo]

I have a new sole-proprietor business client that owns a construction company and pays every workday for all of his full-time employee's lunch. This is more that $4000 for the whole year. Nothing fancy just regular to-go meals from a restaurant that he pays of his company to reward his loyal employees.

I am under the impression that meals are deductible if the main purpose of the meals was the conduct of business but what about employees' meals while on lunch break?

[sjrcpa]

Do they have to eat those meals and are not allowed to leave the worksite to get their own lunches?

Is the worksite so remote that there is no place to get lunch?

[Gildardo]

They can leave and get their own or bring their own too.

The worksites are usually far remote from any restaurants but not always.

Thank you!

[taxes96786 · Accepted solution]

yes it is considered on-site meals and is take as an expense not related to other business meals. 
Don't put it on the meals line because the full amount is deductible.

[BobKamman]

I'm not sure about the employer being able to deduct 100%, not just 50%, of the meal costs.  See discussion of Section 274 starting on Page 6 of these IRS training materials (which may not be up to date):

https://www.irs.gov/pub/irs-drop/eemeals.pdf  

[qbteachmt]

The IRS knows:

https://www.irs.gov/newsroom/heres-what-businesses-need-to-know-about-the-enhanced-business-meal-ded...

There are special rules in place as part of covid recovery. You should always refer to the IRS info for the latest.

[taxes96786]

Bob:

100% deductible: 

• Meals provided on the employer’s premises to more than half of the employees for the convenience of the employer, meaning meals provided to employees to keep them working late or on weekends for the employer’s convenience.
•  
•  
• 50% deductible: 
• Meals directly related to business meetings of employees, stockholders, agents, and directors
• Office meetings and partner meetings
• Meals with clients, customers, and vendors that will benefit the business
• Meals while on business travel status
• Meals while attending a business seminar, convention, or any other form of meeting
•  

[BobKamman]

"Meals provided on the employer’s premises to more than half of the employees for the convenience of the employer"

Is a construction worksite "the employer's premises" ?  And what about the employees back at the office?  They get added into "more than half"?

[linduca]

I agree that they are fully deductible.

[qbteachmt]

I sometimes wonder if anyone follows links provided...

@taxes96786 

The phrase that applies is "enhanced:"

https://www.irs.gov/newsroom/heres-what-businesses-need-to-know-about-the-enhanced-business-meal-ded...

"For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal."

"Temporary 100% deduction of the full meal portion of a per diem rate or allowance.

A 100% deduction is allowed for certain business meals paid or incurred after 2020 and before 2023. A special rule allows this 100% deduction for the full meal portion of a per diem rate or allowance."

"IRS Tax Tip 2022-91, June 14, 2022

The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify for the enhanced deduction:

• The business owner or an employee of the business must be present when food or beverages are provided.
• Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
• Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
• The expense cannot be lavish or extravagant.

Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants."

https://www.irs.gov/newsroom/for-national-small-business-week-plan-now-to-take-advantage-of-tax-bene...

Because this is a temporary provision.

"Section 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provides for the temporary allowance of a 100% business meal deduction for food or beverages provided by a restaurant and paid or incurred after December 31, 2020, and before January 1, 2023. For more information, see Notice 2021-25, 2021-17 I.R.B. 1118, available at IRS.gov/irb/2021-17_IRB#NOT-2021-25; and Notice 2021-63, 2021-49 I.R.B. 835, available at IRS.gov/irb/2021-49_IRB#NOT-2021-63."

Pub 15-B reminds us to not treat the S Corp shareholder-employee as an employee for this benefit.