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IRS may tax work cell phones as a 'fringe benefit'
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The Internal Revenue Service is weighing proposals to tax a portion of work-related cell phone bills as a "fringe benefit" and is looking at ways to simplify the law--actions the wireless industry is hoping to squash.
The IRS is proposing that employers declare 25 percent of an employee's annual cell phone expenses as a taxable benefit. However, the tax collector said employees could avoid being taxed under the proposal if they were able to prove they used personal cellphones for non-work-related calls during work hours.
The IRS also might decide on a set number of phone minutes as "minimal personal use," which would be untaxed. Additionally, the agency said that employers could try and and using statistical sampling to find out what part of their workers' mobile use is personal and how much is work-related. Workers would then be taxed on the difference. Got all of that?
All of this stems from a 1989 law, which mandated that workers who use company-provided cell phones for personal calls count the value of those calls--i.e. that portion of the bill--as income, and then pay taxes on that income. However, employers and their employees have long ignored the rule.
Wireless carriers, including Sprint Nextel and Verizon Wireless, are understandably nervous about the proposal, which might result in enterprise clients cancelling wireless contracts for fears of tax problems, and instead reimbursing employees for a portion of their wireless bills. The carriers argue the rule is outdated anyway, since rates have declined and and night and weekend minutes are free on most plans.
"This is a regulation from a bygone time, dating back to the infancy of the cellphone business, and it is in desperate need of updating," Howard Woolley, a senior vice president with Verizon, told the Wall Street Journal. A Sprint spokesman made similar comments to the Washington Post.
For more:
- see this WSJ article (sub. req.)
- see this Washington Post article
Related Articles:
Cell tax bill debated at House hearing
Senators introduce bill banning wireless taxes
Obama's budget calls for new wireless spectrum fees
Senate looks to scale back wireless tax credits for broadband
Senate considers wireless tax credits for broadband expansion
Comments
Posted by Anarchist | June 12, 2009 - 11:14am
This is small potatoes compared to airline loyalty miles earned on business travel. This creates hundred of Government jobs with huge employee benefits and good pensions. I wonder if they can figure out if I'm sending this on my business BlackBerry?
Posted by DavidH | June 12, 2009 - 11:30am
What are they going to try to do next, tax as income personal calls made on the corporate PBX system? Personal email sent via the corporate email system?
I know, lets tax personal web surfing over the corporate internet connection...
Posted by Anonymous | June 12, 2009 - 11:31am
Amazingly stupid idea !!! Perfect example of the adage "penny wise but pound foolish". The revenue generated from this tax source will be tiny compared to the expenses incurred in implementing this rule and complying with it !!!
Posted by state employee | June 12, 2009 - 11:38am
Our salaries already are way below the private sector. Next they will be taxing us for the value of the use of the microwave oven in the the staff room. We have already been reminded that if we are invited to eat when giving a talk at a lunch meeting, we must declare it as income. How about we focus our attention toward the higher end of the income spectrum?
Posted by Dude on Call | June 12, 2009 - 11:43am
Great. My employer tells me I'm on call and gives me a cell phone to answer at all hours of the day and night. This is required "and by the way you do what to keep your job, don't you?" There is no additional compensation. Now the Government wants to tax me for the benefit? What benefit? I have my own cell phone.
Keep the fricking change Obama...
Posted by bill | June 12, 2009 - 4:21pm
Call your Senators and Congressmen and tell them no! You do not want this! Make them get so many calls they will stop taxing us to death. wait, they do tax our death.. ugh
Posted by Pat Patriot | June 13, 2009 - 2:32am
The stench of socialism. You voted him in. So why are any of you surprised?
Posted by Silver Fang | June 13, 2009 - 12:51pm
I'm confused. Would they be taxing personal calls or business calls?
Posted by Anonymous | June 14, 2009 - 11:01am
What work related cell phone??? I have a cell phone, 2 in fact, that are my personal possessions. When I am contracted to a company, which means I have to increase my plan for more minutes, the company reimburses me for the bill up to their limit. If I'm not contracted, I still have to pay for the phone for when I am, all out of pocket.
I repeat, what work related cell phone? It's my cell phone.
Posted by Anonymous | June 15, 2009 - 5:43pm
Non-contract employees of large Operating companies generally have cellphones these days (ie:Exxon/Shell/Ford/Conoco/etc). When they call their wives on their way home from the office to ask how many jugs of wine and loaves of bread to show up with (or maybe Mazolla and plastic sheating?) the proposed Obama tax will require them to certify how many minutes per month they spend on the company provided phone for these types of conversation and declare this as a taxable benefit. It's always a better tax deal to declare ones self a Contractor and deduct all these expenses as if business related.
Posted by Anonymous | June 16, 2009 - 6:14am
Next the PC on your desk. Please declare how many minutes per day you spend on Digg and pay accordingly.
Posted by SocialismRules! | June 16, 2009 - 6:20am
If your employer requires you to reimburse them for personals call is that a fringe benefit?
Posted by Lordfly | June 16, 2009 - 7:38am
Won't work for me. I pay for my own phone. Since the company I work for doesn't have any business phones, they only reimburse if it is a PDA phone and only a certain amount. So haha. Are they going to look at personal phones and try to figure out what portion is used for business?
Posted by Diamond Dave | June 16, 2009 - 8:22am
And how does Congress and localities not generate revenue from the Fed Universal Surcharge, Regulatory Charge, Administrative Charge, County Line Surcharge, State Sales Tax, State 911 charge, County 911 charge... and a few others depending on your residence/headquarters?
A few years ago, they couldn't even explain the FUS or account for where the money was.
Posted by Anonymous | September 15, 2009 - 11:12am
How anyone could put this on the administration (current or previous) is ridiculous. Not only has this dicussion been going on for some time, it's also just the IRS trying to enforce a law that went into effect in 1989! If you INSIST on blaming a president, then at least go to the administration that was in office when the law was passed. Reagan was leaving and George H.W. Bush was coming in, so take your pick!
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