The Internal Revenue Service has released guidance aimed at clarifying the tax treatment of mobile phones provided by employers to their employees.
The guidance explains a provision of last fall's
IRS
Employers had long complained that the categorization of mobile phones as listed property required businesses and their employees to keep detailed records listing exactly which phone calls were business related and which ones were personal. Many employees needed to carry multiple cell phones just to avoid having their personal calls going to their business phone, and risk a heavy recordkeeping burden.
Simultaneously with the Notice issued Wednesday, the IRS also announced in a
Under this approach, employers that require employees, primarily for noncompensatory business reasons, to use their personal cell phones for business purposes may treat reimbursements of the employees' expenses for reasonable cell phone coverage as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee's regular wages, the IRS noted.
Under the guidance issued Wednesday, in cases where employers provide cell phones to their employees or where employers reimburse their employees for the business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements. The guidance does not apply to the provision of cell phones or reimbursement for cell phone use that is not primarily business related, as such arrangements are generally taxable. Details are in the