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IRS Proposes Taxing Your Company Provided Cell Phone



Are you one of those folks who use a cell phone provided by your company? The IRS has its eye on you as a possible revenue source. According to this report the IRS is proposing to tax you if you use your company issued cell phone. The proposal calls for taxing 25% of business cell phone use as income.

This is in the public comment phase now, and I’m sure the cell phone companies and carriers are commenting quite heavily.

Via The NYDailyNews



  1. GoodThings2Life

    06/15/2009 at 12:35 pm

    Absolutely absurd to even consider, and how would you even regulate this? Sounds more like a scare tactic to me, but even if it’s a legitimate consideration, how do they enforce this type of thing?

    I swear they’d tax us for having a bloody nose if they could!

  2. Jake

    06/15/2009 at 3:35 pm

    This is interesting. I guess it’s similar to being taxed for having a company car which is fair enough. It’s a fringe benefit that is given in lieu of income so it’s right that it should be taxed. I guess a company phone is no different if you use it for non-work related calls.

    On the flip side, I don’t have a company phone but I certainly use my private phone for work related calls. I wonder if I should get a tax break for that :)

  3. Xavier Lanier

    06/15/2009 at 5:57 pm

    Great timing Warner- June 15 is one of the four special days per year that we get to send in quarterly payments to the IRS.

  4. dmpellow

    06/15/2009 at 5:58 pm

    It has long been the rule that if your employer gives you something of value in return for your work it is taxable compensation. The “company car” example is accurate – my father the traveling salesman spent long hours figuring out the proportion of “business” and “personal” use of his company-owned vehicle. The value of the personal use was “income” and taxable.

    A company-provided cell phone is no different. If the company allows you to use the phone for personal calls, you have received compensation. But, how much? The market’s move to monthly flat fees, but continued distinction between voice and data, makes this a tricky question to answer. The IRS is actually proposing a “default” rule – that 25% is personal and,therefore, the worker receives income equal to 25% of the monthly charge. If you think your personal use is only 15%, go ahead and keep the records to prove it, if the time to do so is worth 10% of the monthly charge.

    If you use a personally-purchased phone for business purposes, your employer may reimburse you for that use without reporting the reimbursement as income on your W-2 (like those mileage checks for using your own car on business trips).

    Whether the Internal Revenue Code in general makes sense is debatable; but, the proposal to create a shortcut rule for mixed cell phone use is quite consistent with longstanding practice (e.g., $.55 per mile).

  5. DS

    06/15/2009 at 10:12 pm

    Yes, while I agree that personal use use of anything that your employer provides is “taxable.” The question is how to quantify that. With a car it is not so unreasonable to track the mileage. With a phone it is just plain cumbersome.

    If we are going to enforce this tax on cell phone use, what about the use of the office landlines to call for a dentist appointment? How about taxing the personal use of internet access? What about when your spouse brings by your 3-year-old for a lunch visit and the kid uses a marker and sheet of paper? Oh, and don’t forget that visiting spouse enjoys the use of a company provided parking spot.

    Furthermore, I would submit that unless the cell phone use is more than a couple of hundred dollars per month it’s just not worth it for the IRS to pursue. And if this is enforced, most small companies would just do the easiest thing and just tell employees that as part of the job they need a cell phone just like they need a pair of shoes and leave it to them to figure out. That’s what I would do with my small company!

  6. Netbook Insider Forum

    06/16/2009 at 12:57 am

    I have a company provided cell phone and my employer has already taken action in this regard. They issued a mandate that as of May 1st company issued phones can not be used for personal use. The mandate was in preparation for the IRS changes. For employees that do not wish to carry two phones they offered the option of canceling your work phone and then receiving a monthly stipend in order to cover the costs of using your personal phone for work related use. The monthly stipend is actually pretty generous as it will most likely cover my entire cell phone bill.

    This is an action that most companies will probably have to take as it will be a call accounting nightmare to try and track what percentage of an employee’s calls are made for personal use. It will probably have to be an all or nothing agreement: we provide you with a work only phone, or you use your personal phone for work and we provide you with a taxed monthly stipend.

  7. Ben

    06/16/2009 at 5:36 am

    Maybe they should just make taxes easier? Maybe they won’t get every cent they can squeeze out… but they could try wasting less instead.

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