New Cell TAX?

IRS Defends Proposed Tax On Employer-Provided Cell Phones


By Martin Vaughan
Of DOW JONES NEWSWIRES


WASHINGTON (Dow Jones)--The IRS defended its proposals to enforce a law that taxes personal use of employer-provided cell phones, saying the changes are aimed at helping businesses comply, not taxing individuals.

Dow Jones Newswires reported Thursday that an IRS proposal released this week could wind up taxing employees on 25% of the value of their work cell phone. The IRS notice was meant to make it easier to enforce a 1989 law that treats employer-provided cell phones as a taxable fringe benefit.

A senior IRS official Friday said the agency is more concerned about making sure employers deduct the correct amounts for cell phone equipment and services provided to employees, than it is about taxing those employees.

"The motivation for the notice is to clarify how employers can justify a deduction. It wasn't aimed at employees," the official told Dow Jones in a telephone interview.

The IRS notice dated June 8 discusses tax implications of employer-provided cell phones both for the employer and the employee.

Marianna Dyson, a lawyer at Miller and Chevalier who specializes in the taxation of employee benefits, said that as a practical matter, the IRS proposals would affect both the business and the employee.

For instance, if IRS implemented its proposal to limit business deductions to 75% of the value of the employer-provided cell phones, and deem the rest personal use, the remaining 25% would have to be counted in an employee's gross income.

That would trigger both income tax and payroll tax withholding requirements on the employee's wages.

"If they decide 25% is personal use, guess what? It is a wage, and you have to withhold on it," Dyson said. "For IRS to suggest this would have no impact on employees, is a little disingenuous."

Dyson also noted that the IRS Notice doesn't address how self-employed individuals should handle deducting cell phone expenses.

"Right now, self-employed people have to document every single business call. They are driving around with one hand on the wheel and one on the phone and one in the log book," said Dyson. "This doesn't do anything for them."

The IRS official said the requirement that cell phones be treated as fringe benefits is outdated, and could place a burden on employers. The 1989 law provides that the value of cell phone services can be excluded from an employee's gross income, and can be a deductible expense to the employer, only if the employee keeps strict records showing that the phone was used for work only.

"At the time this was enacted, every single call cost $4 or $5. That is not the world we live in anymore," the official said. "We've been hearing from companies that [the requirement] is too burdensome. We needed to think about how we could make it less expensive," the official said.


Source: Article - WSJ.com

 

I guess this is another "change" that we're getting.

 

So I'm going to have to pay taxes on the work phone I don't want to carry, but have to so I can be expected to work for free outside of business hours?

 

The way I understand it, you would only get taxed if you use your work phone for private calls, and then only pay taxes of your private calls. So if you use the phone for work related calls only, you will not get taxed.

 

Never Mind:

IRS Now Wants to Repeal Cell Phone Tax by PC World: Yahoo! Tech