Hopefully, you’re more outraged than surprised. There’s actually a completely outdated law that classifies employer-provided cell phones not as work tools, but as taxable benefits. IRS has now proposed employers report on each worker’s cellphone usage and that workers pay tax on personal calls.
IRS deems employer paid mobile phone benefits a “fringe benefit” rather than a business tool. Under the proposed rule, employers would statistically report business and personal phone usage with the actual tax based on the employee’s tax bracket and cost of wireless service. Determination per employee based on statistical employee usage can’t be fair for obvious reasons, but the law is old and the idea for a new rule is bad. The idea does not work.
Today, mobile phones are just another necessary business communications tool, and the IRS should treat them as such.
WSJ estimates workers in the 28% tax bracket with a $1,500 annual wireless expense could pay an additional $105 to Department of Treasury under such a rule. A congressional proposal to repeal the tax is backed by a number of companies including Verizon and Sprint Nextel Corp. and they are supported by local government, education and farm groups.
“The rationale behind this policy perhaps made sense in the 1980s,” said Sprint Nextel (NYSE: S) spokesman John Taylor. “But it doesn’t reflect how people live their lives and the ubiquitous nature of cell phones.”
“This is a regulation from a bygone time, dating back to the infancy of the cellphone business, and it is in desperate need of updating,” said Howard Woolley, a senior vice president with Verizon Wireless.
- National Review: IRS Weighs Rules for Taxing Private Use of Work Cellphones
- Washington Post: IRS Seeks to Simplify Workers’ Cellphone Tax Law