The IRS request for comments on taxing employee cell phones has stirred up a hornets nest. The IRS said they were looking at three ways to deal with employee use of cell phones:
- a) Treat all employee cell-phone use as business use (so no amount has to go on the employee W-2)
- b) Treat 75% of use as business use; or
- c) Require statistical sampling of business use.
Most commentary zeroes in on the second alternative - taxing 25% of use as personal use to the employee. The Wall Street Journal says:
The IRS believes that some percentage of the costs incurred by employees using company-provided wireless devices should count as a "fringe benefit" and thus be subject to taxation. Since workers inevitably end up taking personal calls or emails, the thinking goes, it's only fair that they pay for the privilege. What's next? Maybe a per-cup tax on office coffee, or targeting furtive visits to ESPN or Hulu on the office PC? As one wag put it on the Journal's Web site, "It's like charging for the use of the company washroom."
Tax Grrrl is annoyed:
It’s called the potential to collect untaxed revenue. Seriously, IRS, we get it. You want our money. Stop trying to call it something that it’s not.
While the IRS would be foolish to go after cell phone use, the real culprit is Congress, which has never repealed the Stone-A-Phone Era rules that it enacted back when they were called "car phones" because you practically needed a car to carry one.
More from the TaxProf.
UPDATE: IRS hangs up on taxing personal use of cell phones. Right answer. Statement here.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to