EMPLOYEE USE OF CELL PHONES FOR BUSINESS IS NOT TAXABLE

The IRS announced September 14 in Notice 2011-72, that, when an employer provides an employee with a cell phone that is used primarily for "noncompensatory business reasons," then the IRS will treat the employee's personal use of the cell phone as a nontaxable working condition fringe benefit without any further substantiation required.

Paul Altavena of ConnectPay relates that the IRS will also treat the value of any personal use of the business cell phone as a nontaxable de minimis fringe benefit. This new guidance applies to the use of any employer-provided cell phone occurring after December 31, 2009 and benefits both the employer and employee.

The non taxable deminimus fringe also applies to the business use of the employees personal cell phones according to Michael Young of ConnectPay. Michael points out that in a memo from the IRS to its field examiners, the IRS further explained that where employers require employees to maintain and use their personal cell phones for business purposes and reimburse them for the business use of their phones, examiners should use the same approach as that found in Notice 2011-72.

The memo cites an example where an employer requires an employee to use his own cell phone to contact clients outside normal office hours. The employee uses the phone for both business and personal calls. In this situation, if the employer reimburses the employee for the basic plan expense, there would be no additional income to the employee.

This notice by the IRS further defined and clarified the Jobs act of 2010 Section 2043 of the Small Business Jobs Act of 2010, Pub.L.No. 111-240 effective December 31, 2009.


http://www.irs.gov/pub/irs-drop/n-11-72.pdf