Tax season will soon start, and the disagreement regarding the deductibility of firefighter meals while on duty will again roar to the front burner.
It seems that the deductibility of meals is preached starting with fire school training and is reinforced at every firehouse by the veterans. Many, if not most, firefighters are convinced that meals while on duty are always deductible and there are no conditions connected to this position.
Like most things relating to taxes there is the rule, and the possible exception. Even with all the rhetoric this topic generates it boils down to a few basic considerations. 1.) You are a firefighter and you and the others in your station voluntarily agree to put money into a food (meal) fund. 2.) You are a firefighter and your employer, as a condition of employment, requires all firefighters to pay into or have a payroll deduction that is put into a meal fund.
Basically: #1 – no deduction; #2 – deduction
Meal expenses are deductible under code Sec. 162(a) if the employee is required as a condition of employment to remain on the premises and purchases a meal from his employer. This would also apply, among others, to police, paramedics, and air traffic controllers.
Many of you don’t believe this, as your tax preparer has offered this deduction for years, and there have been no consequences (audits). Regardless, you are being misled, and the IRS could decide to challenge this deduction at any time.
The purpose of writing this is not to alarm you, inflame your emotions or put you and your tax preparer on a collision course. There are numerous preparers, national firms, CPAs and those without any credentials, who have and continue to allow these deductions.
If you want to know what decision codifies this conclusion, Google Sibla Decision1985-012 or go to the U. S. Tax Court site (www.ustaxcourt.gov) and search for the case.
Why, you may ask, does the IRS not challenge meal deductions if they are not permitted under the Code? The IRS will NEVER tell, but my personal opinion focuses on the size of the deductions, and the public perception of hassling revered public servants. After all, businessmen take deductions for meals and entertainment. Why shouldn’t they be available to firefighters?
These deductions on Schedule A (Itemized Deductions) are subject to exceeding the 2% of Adjusted Gross Income hurdle. Using an AGI of $50,000, a meal expense of $3,000 would provide a net deduction of $2,000. A taxpayer in the 20% tax bracket would net a possible tax savings of $400. When you consider the time it takes the IRS to audit a return, the amount collected has to be worth the effort. Let’s face it, the IRS is swamped, and they have to pick their battles carefully. Time is money.
For you, who are not persuaded, be aware there is a tax gap, and over the past two years the IRS has added many new collectors and revenue agents. You may avoid their scrutiny, but if not, there are considerations such as interest, penalties and the general hassle of an inquiry.
Tax Wisdom – We shall now embark on a voyage through the various sections of the Income Tax Regulations which are enough to boggle the mind of an English-speaking U.S. citizen.
– William A. Goffe