The IRS has discovered its own way to help close the ballooning federal deficit: arbitrarily classify as personal 25% of an employee's use of a company-issued cellphone, and therefore subject to tax as a fringe benefit.
According to the Wall Street Journal, it's one of several options the IRS unveiled this week dealing with the tax treatment of such phones. Today, the value of these cellphone services have to be included in a worker's gross income, unless the user proves with detailed records that it's used only for work purposes.
According to the Journal, the options are apparently an attempt by the IRS to simplify the existing 20-year-old law "that classifies work cellphones as a fringe benefit subject to personal income tax." (Carriers and CTIA, an industry trade group, have been pushing efforts to repeal the law entirely, arguing it never contemplated the widespread use of cellphones for business.)
Thus, one IRS idea is a "safe harbor" provision that would simply designate 75% of cellphone usage to be for work, creating a standard limitation on employer deductions and a potentially simpler way to tax the value of the 25% of personal use for the employee.
Other options include having employees show proof that they have a separate personal cellphone available during work hours; designating a set of minutes for "minimal personal use"; and use of statistical sampling by employers to determine how much of their employees' cellphone use is personal.
The public has until September 4 to comment on these proposals.
"The effect on cellphone companies of strict IRS enforcement of the provision could be substantial. For example, companies wishing to avoid problems during audit with IRS could cancel company-wide wireless contracts, and begin reimbursing employees for a portion of their own cell service contracts," according to the Journal.
The story cites the example of some universities, including the University of California system, that have had to cough up additional payroll taxes because they couldn't demonstrate to IRS auditors that their staff used cellphones only for work.
Higher education and other groups long have been seeking relief from, if not repeal of, the whole requirement. A repeal bill introduced in Congress last year stalled but it's been reintroduced in both the House and Senate.
What say you? Should work cell phones be taxed for personal use? Take the poll....
Cox is a senior editor at Network World.
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IRS fishing again
This is absolutely stupid. If that becomes a definite rule, then office phones should be covered the same way.
How do they differentiate the total cost of the smart phone serves that the company needs me to carry and the few personal calls I make?
this sounds really intrusive.
Anything provided by the
Anything provided by the office should be taxed then: Computer usage, internet access, office phone, hell, what about the lights? I sometimes read a book on my lunch hour.
Sorry, I'm a bit confused here.
Innocent until proven guilty, or is it the other way round now?, I can never remember.
level playing field
Commuters should then report their travel to/from employment as a non-reimbursed busines expense. It sure isn't my personal time & I do it because my employer won't let me work from my home. Why should the Gov't get to have their tax cake and eat it too? We don't.
I'm required to have an employer-furnished phone
As a server administrator for a VA datacenter I'm required to carry an employer-furnished Blackberry. However, I set it to forward to my personal phone and put the BB in a closet, where it has sat for over two years.
I wonder if I can get a tax credit for using my personal phone for the employer's business?
;)
IRS leeches, death by a thousand cuts.
Uh oh, I ate a bagel and drank some coffee this morning (provided by the company), then went to tha bathroom twice. How much tax do will I have to pay on those "benefits"?
And just what actuary sugested the number is 25%?
There may be a few people who would risk loosing their job by abusing the company cell phone. But, I have a personal cell phone and the company phone, when I use it, is for company business. Requiring me to generate a detailed call log is an egregious burden when I have my own personal cell phone... The IRS should assume 100% business on a business phone... period. Then the IRS should have to PROVE otherwise. For someone who only has a company phone... maybe but the percentage should be based on a study not pulled out of the IRS commissioner's posterior.
The Government Screws Us Again
This is just the beginning. Thanks to Obama and the fly-away spending of his administration, you are going to see new taxes popping up everywhere.
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