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Tax Law

Mobile Phones May Be Taxed as ‘Fringe Benefit’

Posted Jun 12, 2009 10:30 AM CST
By Molly McDonough

The Internal Revenue Service, in a notice posted this week, is proposing that employers assign 25 percent of their employees' yearly phone expenses as a taxable benefit.

Crunching the numbers, the Wall Street Journal (sub. req.) estimates that an individual in the 28 percent tax bracket with a wireless device that costs the company $1,500 a year could have to pony up another $105 to federal tax coffers.

Employees could avoid tax liability if they can prove they use personal cell phones for nonbusiness calls during work hours.

The WSJ notes that the IRS move is meant to more strictly enforce a current rule that classifies cellphones as a taxable benefit rather than a 24-hour-a-day work tool.

This isn't a new idea, but may give the IRS a means of enforcement. A 1989 law, that remains widely ignored, requires employees to calculate the value of making personal calls on company-provided phones and pay income taxes on it.

Neither employers nor their employees are happy with the idea of the imposition of a tax.

"Your job gives you a phone to be in 24-hour contact. It's only natural that you're going to use it personally," Anthony Cecchini, an analyst at investment bank Oppenheimer & Co., told the WSJ. "If I need to get a personal email or call, it shouldn't be a big deal."

The IRS is taking comments on its proposal through Sept. 4.

Also see:

mocoNews.net: "Got A Company-Paid Cellphone? The IRS Wants To Tax Your Personal Calls"

Internal Revenue Service: "Notice 2009-46, Substantiating Business Use of Employer-Provided Cell Phones"

Comments

1.

B. McLeod
Jun 12, 2009 10:52 AM CST

This actually represents a softening of their existing approach.  Up to this point, they have been effectively forcing 100% of the value of cell phones into taxable income unless the employer maintains a proper accountable plan.  The detail and monitoring required to support such a plan (i.e., basic detail documentation that every call was 100% business-related or was reimbursed by the employee) is onerous to the extent it is cheaper to just to include the item in income.  It has been a classic example of imposing taxation by administrative overburden, and it also applies to laptops, notebook computers and peripherals.

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2.

K.G.
Jun 12, 2009 3:34 PM CST

Perhaps the enjoyment of office air conditioning should be taxed when the employee is not actively working such as when they are making calls on their company cell phones.  The IRS could draft an “Air Conditioning Log,” which would be entitled “Schedule A/C,” for all employees to fill out and if that proved to be too much of an administrative burden they could elect to pay a flat tax of $30 per month.

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3.

Gone Mad
Jun 14, 2009 8:17 PM CST

We could also could tax the value of using the facilities unless the employee is working while on the can.  A couple more brilliant ideas like this and we’ll eliminate the federal budget deficit!

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4.

Gone Mad
Jun 14, 2009 8:18 PM CST

We could also could tax the value of using washroom facilities unless the employee is working while on the can.  A couple more brilliant ideas like this and we’ll eliminate the federal budget deficit!

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5.

B. McLeod
Jun 15, 2009 11:44 PM CST

Perhaps “the Service” will get onto those employees who sneak electric fans into the office for their personal comfort, or recharge their cell phones and IPODS with the firm’s electricity, or pitch a bedroll under their desk at the end of a 20-hour day (expropriating employer-provided lodging).

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