Do you provide food and drinks to your barn staff? Make a morning latte run to keep the grooms happy? Order in pizza when show preparations run into the evening? Provide lunch at shows?
If so, how you record those purchases can affect not only your own tax bill, but also the taxes your employees owe.
Most people who have a passing familiarity with business taxes in the US are aware that “meals and entertainment” expenses are only 50% deductible for income tax purposes.
However, there is a big exception. Employer-provided meals are tax-free to the employee and 100% deductible by the employer if they are provided:
• On the employer’s business premises.
• For the convenience of the employer.
• To employees who are “on duty”.
The employer’s business premises are generally defined as where the employees work. For most of you that’s in your barn or on your farm property. At a show, your show stalls are your premises, and a good case could be made that the holding ring is if a groom is stuck spending an hour there with a horse. The back seat of your truck is a business premise also, if that’s where they are required to be on the drive to an away show.
“For the convenience of the employer” means you have a business reason to feed your staff on site, that’s not just because they don’t have enough money for groceries. Keeping employees on the premises in case of an emergency satisfies this requirement. So does the fact that you can only give them short meal breaks due to the nature of your business, and it’s not practical for them to go out, buy food, eat, and get back in that time. It is okay if one person’s job duties includes shopping and prepping food for the group. Remind them to save the receipts.
To be deductible, meals for employees must generally be provided during the work day, not before or after. But if the employee was so busy that they didn’t have time to eat the food you bought them until after finishing their work, that’s okay. And if supper at a show comes between afternoon chores and late evening hand walking, that’s part of the work day.
Notice that we are talking here about “meals provided”, NOT “money to go buy food”. This can be a sticky spot at shows—giving your staff cash to hit the food trailer doesn’t qualify. Instead have a tab with the vendor that you close out at the end of the weekend—be sure to get a receipt.
And the sodas and snacks you keep in the barn fridge for your staff to munch? Those are 100% deductible as a “de minimus” benefit, because they’re “not much”. Just a nice little tax break for you and your staff.