IRS backs away from tax on work-issued cell phones

The Internal Revenue Service is backing away from proposals aimed at stricter enforcement of a law that taxes personal use of work-issued cell phones, and is now asking Congress to repeal the law altogether. Wireless carriers argued the 1989 law is outdated and does not reflect the realities of today's wireless industry.

IRS Commissioner Doug Shulman asked Congress to repeal the law to ensure that neither employers nor employees would be taxed for personal use of work-issued cell phones. "The passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete," Shulman said in a statement.

The current law taxes personal cell phone use on work-issued handsets as a fringe benefit. A person could only be exempt if they kept detailed records of what call were for personal use and which ones were for work--a rule that has been largely ignored by employers and employees. One IRS proposal recently put forward--and roundly contested by the wireless industry--would have taxed 25 percent of employees' cell phone use as personal.

Carriers such as Sprint Nextel and Verizon Wireless have sought the outright repeal of the tax. Further, measures in Congress to repeal the law have strong bipartisan support. The IRS has not withdrawn its proposals, however, and is still seeking comment on how employers should make employees account for personal calls.

For more:
- see this WSJ article (sub. req.)
- see this Reuters article

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