These are new companies in California Bay Area. Some are IT startups, some are doing online trading. When I go through their financial statements, I saw about 200K "business meal and entertainment ". I ask them what kind of "business meal and entertainment " it is.
The client told me, "our company provide free lunch for all employees".
Okay, "the value of meals provided to an employee and his family by an employer is not income to the employee if the meals are provided on the employer's business premises for the employer's convenience".
"Meals, meal money, or local transportation fare provided to an employee is an excludable de minimis fringe if the benefit is reasonable and is provided in a manner that satisfies all of the following conditions:
(1) it's provided on an occasional basis,
(2) it allows an extension of the normal workday, and
(3) with respect to meals and meal money, it enables the employee to work overtime."
However, the employees at this company work at regular hours-- 8 hours a day, 5 days a week, no overtime. Free lunch every day.
Some startup company we are doing bookkeeping start to provide free lunch too. How should we record the expense? Most of the employees were from the high tech companies in the bay area with delicious free lunch. Have you ever heard any of the IT company get trouble with "free lunch" issue?
How should I hand the 200K lunch expense? Do you have any suggestions?
Thank you,
If you told them it is fringe benefits and should be reported on