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Thursday, September 22, 2011

Can You Hear Me Now?

IRS Issues "Guidance" on Tax Treatment of Employer-Provided Cell Phones

Last fall, a provision in the Small Business Jobs Act of 2010, removed cell phones from the definition of listed property, a category under tax law that normally requires additional record keeping by taxpayers.

The IRS now states that employer-provided cell phones can be considered an excludible fringe benefit. This means that if an employer provides an employee with a cell phone used primarily for non-compensatory business reasons, both the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require record keeping of business use in order to receive this tax-free treatment.

Also announced in this memo is information with respect to small businesses that provide cash allowances and reimbursements for work-related use of personally-owned cell phones. Under this approach, employers that require employees, primarily for non-compensatory business reasons, to use their personal cell phones for business purposes may treat these reimbursements for reasonable cell phone use as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee's regular wages.

I guess when the IRS says "Paperwork Reduction" - they actually take themselves seriously.With the changes in technology also comes the changes in taxation. And in case you are ever on Jeopardy here is some tax technology trivia: 

"Within 25 years, the mere trickle of 25,000 electronically filled individual tax returns has turned into a torrent of more than 100 million a year and led to a permanent change in the way Americans file their taxes".

Additional information on this topic can be found on IRS Notice 2011-72 as posted at

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Disclaimer: Tax advice contained herein was not written to be used and cannot be used to avoid payment of taxes or to avoid penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. All information provided is for illustrative purposes only. You should contact an accountant, tax preparer or tax attorney for advice or information specific to your situation. This information is not to be used as a directive.

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