Lifts Record Keeping Burden for Small Business
The IRS categorization of mobile phones as listed property required business owners and their employees to keep detailed records listing exactly which phone calls were personal. Many employees needed to carry multiple cell phones just to avoid a heavy cell phone recordkeeping burden.
The new recently issued Internal Revenue Service guidance provides an explanation on the treatment of employer cell phone as an excludible fringe benefit (a fringe benefit is a form of pay [including property, services, cash or cash equivalent] in addition to stated pay for the performance of services).
Accordingly, when an employer provides an employee with a cell phone primarily for noncompensatory business use, the business and the personal use of the cell phone is generally nontaxable to the employee. The IRS will not require recordkeeping of business use in order to receive this tax free treatment for cell phones. This new guidance also applies to arrangements common to small businesses that provide a cash allowance and reimbursements for work-related use of personally-owned cell phones. So, employers that require employees to use their cell phones for business purposes may treat reimbursements of the employees’ expenses as nontaxable.
That is great news for the millions who use their cell phone for business.