In 1989, cell phones were considered a luxury item subject to special record keeping requirements to establish their business use as listed property under the US Tax Code. Today, wireless calling rates have dropped, and mobile calls are not considered to be a luxury item.
In June of 2009 the Internal Revenue Service (IRS) proposed to simplify the rules by counting 25% of employees’ use of work wireless phones as taxable. After a public outcry, the IRS asked Congress to repeal the law and eliminate taxes on personal use of corporate paid wireless services. Last month, IRS Commissioner Doug Shulman announced that he has put the plans to develop a new formula for calculating the tax on hold, and this month, President Obama’s 2011 budget plan called for a repeal of the tax.
What Should Your Company Do?
While repeal of the law seems likely, it has not happened. Ultimately, your tax compliance group will have to determine how you will manage the tax. But, this is a good time to examine your corporate mobile policy for personal use of employer paid wireless services. Your mobile policy should clearly state if there is a monthly allowance and what is acceptable personal use of the device. If you don’t have a mobile policy, or it doesn’t address this issue, now is the time. For a sample mobile policy, download our whitepaper – Corporate Mobile Policy Template: Establishing an Effective Mobile Policy.
Even if the law is overturned, organizations still need policies to manage costs for personal use of devices. Telesoft can help with exception reporting that identifies the largest users (for both personal and business use). This will enable you to identify employees that are in the wrong plan or those who may be spending too much time on the phone based on their job role.
