Tax Code Information: What Is Irs Section 119-1?

Have you ever wondered if meals and lodging furnished by your employer are tax deductible? An examination of IRS section 119-1 tells you everything you need to know.

When are meals and lodging exempt from your taxable income total? Internal Revenue Service code section 119-1 tells you. Giving the taxpayer two tests to determine his or her circumstances, the IRS questions "the business premises" of your employer - whether the meals and lodging were furnished on the business place grounds themselves - and the "convenience of the employer" - if the meals and lodging are being given to the worker in order to ease the constraints of the conduction of business.

In its legalistic manner and unfamiliar jargon, what the IRS is saying in section 119-1 is that you can deduct the value of meals or certain lodging from your taxable income. If the meals or the lodging are reasonable extensions of business, then they are likely to be gross income-deductible. Think of the businessman on a trip. If he lives in New York City, he couldn't possibly be expected to commute for a week of meetings in Los Angeles, yet the lodging provided by his company in this case is not deductible from the businessman's gross income. This is because the lodging is not at the businessman's actual place of employment, and the IRS only allows deductions for lodging at the business "premises" itself.

Given this exception, what type of employees does the lodging deduction option cover? Not many, as you can imagine; although household servants - butlers and maids and home care staff - live and work at their employer's premises, not a lot of other workers are covered under this statute. Mainly if you do temporary work in construction or contracting, where jobs are located in remote areas, or if you normally engage in work that requires the setting up of camps (think mountain-climbing guides or park ranger details) then the employer premise option may exist for you. Otherwise, for the majority of the rest of us, simply getting sent out on a business assignment isn't good enough for deduction purposes. You might get sent to Saskatoon for a business conference, but the amount that your employer forks over for the hotel room isn't deductible from your gross income.

But let's look further at meals. Under what circumstances can an employee expect to be able to deduct the value of meals from their gross income? Here we find many exceptions to allow for deduction.

When a business makes meals available, it is rarely out of the goodness of the heart of its CEO. The IRS recognizes that businesses will furnish meals without charge mainly for one reason: for convenience's sake. Think about your bank. Have you ever been in there at lunchtime? Banks do a lot of business at the noon hour, so the IRS realizes that some banks or other similar businesses will want to furnish meals for their employees. This allows for better productivity by employees who now do not have to leave the premises to eat.

What does this mean to the taxpayer, however, come mid-April?

In general, "noncompensatory" - provided not for compensation in fulfilling an employee's contract - is a big test. That the noncompensatory nature can be determined in most cases by the employee himself is very helpful, however. Let's look at a few examples of what the IRS would allow an employee to do with regard to deductions and free chow from his or her boss.

Remember the busy bank? If meals were provided to the bank tellers on the bank premises, these would most likely be deductible from the gross incomes of the tellers. The bank is not providing the meals for compensatory reasons; the meals are available for convenience reasons. In other words, so that the tellers can eat fast and get back to work! In this case, the value of the meals would be deductible for you, if you worked at the bank in question.

Many people have worked in a restaurant at some point in their lives. Food service businesses and restaurants are given a very special exception by the IRS, with regard to workers and meals provided. Since many restaurants furnish, without charge, meals to their wait staff and cooks for convenience reasons, certain standards apply. On a normal working day, an employee could receive meals that would be deductible; the exception is that workers who are allowed a free meal anytime - in other words, even on their days off - are not permitted by the IRS to deduct the value of those particular meals from their gross income. The main difference between restaurants and other businesses is the designation of time of the meal. Food services are permitted to furnish tax-deductible meals "during, immediately before, or immediately after" a worker's shift. This takes into account the nature of a restaurant's business, and provides the food service employee with some very specific guidelines for deducting the value of meals from their individual gross income.

For most people, the IRS gives a very clear pronouncement of what is not gross income deductible. So many business travelers, from the salesman to the training manager and everyone in between are given a "per diem" amount for meals. If you need it, it's there for you, and you get it no matter what, each day that you're on the job. If your employer gives you 30 bucks a day for meals, can you deduct what you spend from your gross income? The answer is a resounding "no." The IRS clearly states that "meals which an employee may or may not purchase" - in other words, optional expenditures from a general fund, like a per diem - are not deductible from the employee's gross income.

That last exception covers a lot of folks. If, however, your job provides you with food and lodging free of charge, you should really look into the options available for tax deduction. With the guidelines listed above, you may find that the IRS may actually - gasp! - give you a break. That's something that's always worth looking into.

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