On April 16, the House of Representatives took a first step in repealing the 20-year-old rule requiring businesses to keep track of employees’ personal use of company-reimbursed mobile voice services. Repeal of the tax will not be complete until the Senate votes on it, and the President signs it into law. Passage seems likely since President Obama’s 2011 budget plan, calls for a repeal of the tax.
In 1989 the tax was established when cell phones were considered a luxury item. Under the current law, businesses have been required to keep track of employees’ business usage versus personal usage of cell phones, and to report personal use as taxable income on employees’ W-2 forms.
What You Should Do Now to Prepare for Repeal of the Law
Many enterprises looked at the effort to comply with the current law and decided it was easier to have the enterprise provide stipends to cover the monthly cost or allow employees to expense the charges. These costs are often buried in expense reports and there is little to no scrutiny of these charges. In addition, following an employee liable approach offers few opportunities to optimize expenses. Enterprises are not able to take advantage of having most employees on the same network with “free” mobile-to-mobile calls that avoid using peak minutes. There is also no opportunity to combine the buckets of minutes from individuals into pools where an occasional monthly spike in an individual’s calls can be spread over a large group of pooled users.
If you already have a corporate liable plan where you are managing expenses, this is a good time to review your policy before the law changes. Your tax specialists or Human Resources staff is probably getting ready to let employees know that they will no longer be reporting this as a taxable benefit after the law is enacted. You should take advantage of this opportunity to update your mobile policy and ensure that employees are informed regarding your policy. After the tax is repealed, it will be important to reinforce a message that employees still need to limit their personal use of devices.
The best approach is to develop a clear written policy for mobility that establishes a framework to control mobile expenses, address and manage security for data on the devices, and reduce risk through a corporate liable plan. Telesoft has a template of a mobile policy that you can use.
