August 04, 1998
IRS Initiatives on Tax Issues
Related to Employee Meals
WASHINGTON - The Internal Revenue Service today took two
actions to assist employers in the hospitality industry on certain
tax issues related to providing meals for employees. This industry
includes casinos, hotels, resorts, and similar establishments.
First, in Announcement 98-77, the IRS released draft training
materials on employee meals in the hospitality industry for future
use by its auditors, inviting interested persons to offer comments.
Second, in Announcement 98-78, the IRS outlined a settlement
initiative allowing hospitality industry taxpayers to easily resolve
these issues covering periods through December 31, 1998.
The employee meals issues involve employer deductions for
expenses related to providing the meals on the employer's premises,
as well as certain income and employment taxes on both employers and
employees for the value of the meals. The employees involved
include, but are not limited to, those who work in housekeeping
services, gambling operations, recreational activities, maintenance,
and food service.
Under the tax law, an employee may exclude the value of a meal
from income, provided certain conditions are met. When the meals do
qualify as tax-free to the employees, the law limits the deductions
employers can take for the costs, unless certain other conditions
In its first action, Announcement 98-77, the IRS released draft
training materials on the tax-treatment of employer-provided meals
in the hospitality industry. The training materials are intended to
provide guidance to both IRS auditors and taxpayers on the
application of current law. Interested persons are invited to offer
comments through September 30, 1998, that will be taken into
consideration in preparing a final version of the materials,
expected to be released by October 31, 1998.
"We expect that taxpayers in the hospitality industry will help
us refine our training materials through their feedback," said
Thomas Smith, IRS Assistant Commissioner for Examination.
In the second action, Announcement 98-78, the IRS outlined a
settlement initiative that allows hospitality industry taxpayers to
resolve tax issues relating to employer-provided meals for periods
through December 31, 1998. The issues resolved under the settlement
initiative include employer deductions and withholding and
employment taxes related to the provision of meals on the employer's
premises, as well as income and employment taxes on employees for
the value of the meals. Employers who accept the terms of the
settlement initiative will resolve these issues for their employees.
"Although a new provision in the IRS Restructuring and Reform
Act may resolve the income and employment tax issues related to
employer-provided meals for some taxpayers, the settlement
initiative will provide certainty and closure to other taxpayers
whose issues are not resolved by the legislative change," Smith
The settlement initiative is available to taxpayers who indicate
their interest in accepting the offer no later than 30 days after
the draft training materials are finalized. For further details on
the settlement offer, including conditions on accepting the offer
and how to indicate an interest in accepting the offer, see
Announcements 98-77 and 98-78, regarding the training materials
and settlement initiative, respectively, will be in Internal Revenue
Bulletin 1998-34, dated August 24, 1998, and are available through
the "Tax Professional's Corner" of the IRS Web site at
www.irs.ustreas.gov. In addition, interested persons may request a
copy from the IRS Office of Employment Tax Administration and
Compliance (OETAC), Room 2404, OP:EX:ST:ET, 1111 Constitution
Avenue, N.W., Washington, D.C. 20224, or by calling (202) 622-3650
(not a toll-free call).
Previous | Next
1998 IRS News Releases | News Releases Main | Home