Taxing your cell phone
Few people realize that the IRS requires employers to allocate a portion of the cost of any employer provided cell phone to personal use and tax that as a benefit to employees. Everyone who doesn’t work for the government realizes how ridiculous this is – its bad enough that employees have to carry around a mobile device and be available 24/7 but to tax them for it is adding insult to injury. Plus most personal use has no additional cost to the employer due to carriers “free nights & weekends” pricing plans.
The IRS has raised public awareness of this issue by proposing simplified plans for determining how much to charge employees for their personal use. I applaud them for trying to simplify this calculation. Its disappointing that they don’t recognize that taxing personal use of a cell phone makes no sense and should be scrapped. You would be surprised to learn how few comments are normally received on such proposals (less than 100 is typical). Just a few well considered responses can change the direction of regulations & legislation, which is why I have begun to submit comment letters to government agencies and elected officials on topics that affect me and my clients. Instead of just complaining, we can actually make positive changes with a bit of effort. My comment letter on this proposal is below. If the issue affects you, I’d encourage you to also submit a comment.
With respect to the IRS proposal to simplify substantiation of the business use of an employer provided cell phone, no amount of simplification is sufficient to overcome common sense. Businesses procure and pay for such equipment for THEIR benefit, not the employee’s benefit. Any personal benefit derived from these mobile devices is minimal and more than offset by the convenience to the employer of reaching its employees 24/7 (and the associated burden on the employee). Mobile phones are provided for the benefit of the business. Period. Forcing employees to carry around multiple devices to avoid an unfair tax on their minimal use of a business phone is a ridiculous additional burden on employees.
Having worked in both a Fortune 100 company which tried to implement the previous requirements and with small businesses, I can confidently state that the amount of work being imposed by the IRS is completely out of proportion with both the benefit and the spirit of the law. When these rules were enacted, cell phones were an executive perk. Today they are a necessity for almost every level of employee. Stand alone cell phones are no longer used in businesses – smart phones are the only type of device routinely issued to employees and this is for the primary purpose of receiving email communications while away from the office/computer. Cellular carriers tie all devices to a mobile number which then provides the additional benefit of voice calls. That benefit has turned into a burden due to the IRS regulations. Further, due to the plans most carriers offer with free weeknight & weekend minutes, there is normally no additional cost to the employer for the majority of personal use by an employee.
Employers should be able to deem personal use to be minimal under certain simple conditions:
- The mobile device receives employer email or other non-voice communication
- The employee is expected to regularly carry the device during non-business hours
- There is minimal (<10%) or no additional cost to the employer for the typical employee’s personal use of the device (plans that offer free weeknights and weekends would meet this test automatically since that is when the majority of personal use occurs)
Please consider easing the burden on both employers and employees with a common sense approach to this issue.
But that’s the last one. At least in this post…