The IRS really wants to help businesses comply with tax laws regarding employee cell phones, so the agency has issued a new proposal that would have employers assign 25% of the cost of an employee's cell phone as taxable benefit.
This represents a shift to stricter enforcement of a rule that treats cell phones as a benefit to the employee, rather than an instrument of the employee's work. The government says that this isn't targeted at the employees
themselves, and claims that the proposal is instead a way for employers
to simplify the process of determining what portion of the employee's
cell phone bill is deductible and what is a taxable benefit for the
"The motivation for the notice is to clarify how employers can justify
a deduction. It wasn't aimed at employees," an unnamed IRS official
told the Dow Jones Newswires.
Employees would still be taxed on the benefit, though. "If they decide
25% is personal use, guess what? It is a wage, and you
have to withhold on it," Marianna Dyson, an employee benefits attorney
at Miller and Chevalier told Dow Jones. "For IRS to suggest this would
have no impact on employees, is a little disingenuous."
Tax Man's Target: The Mobile Phone (WSJ)
IRS Defends Tax Proposal for Employer - Issued Mobile Phones (WSJ)