June 14, 2009

IRS Looking To Save Companies Money With Cell Phone Tax

An IRS official informed the press on Friday that they are working to fine-tune accounting methods for personal cell phone use on employer-paid phones that will help companies save money, Reuters reported.

Until now, companies have been following a 1989 law that requires companies to track personal use with scrupulous records of minutes if they intend to deduct worker cell phones as an expense.  But, the new law will make employer and worker compliance much simpler.

"Minute by minute documentation really doesn't make any sense -- we've been hearing all about it, and we said yes it makes no sense," said a senior IRS official, who was not approved to speak for attribution.

The IRS has presented changes that are aimed to "reduce how much employers have to spend trying to comply with the tax law," the official added.

Workers are obligated under the existing law to pay tax on cell phone use that is personal in nature on a work phone as a fringe benefit.

In an IRS released notice this week, officials are asking the public for suggestions on ways to modify the present system.  Some of the ideas brought forth include permitting employers to deduct the entire sum of a worker's cell phone use if a worker can prove a personal phone is used for some period, and allowing employers to use statistical examples to generalize about usage. 

Another option, employers may also allocate a set rate for business use.  The IRS has proposed 75 percent for business use, with the left over deemed personal use. 

"For employers we thought we should give them alternative ways to take these deductions," the IRS official said.

The IRS will continue to hear public comment on the proposals until September 2, 2009.

Some believe, however, that the IRS effort could add momentum to attempts by the cell phone industry and business community to get rid of the law completely.

"The policy rationale of the late 1980s when this law was passed was a time when cell phones were a luxury," said John Taylor, a spokesman for Sprint Nextel Corp. "Think about the all you can eat rate plans we offer. For an employer that is a burdensome record-keeping requirement."

It was a close call last year when the U.S. House of Representatives passed a repeal and the Senate obtained 60 sponsors for its proposition.

The measures, which have received bipartisan support, have been reinitiated once again this year. 

Leaders of the House and Senate committees received letters last week from the cell phone industry, the Chamber of Commerce and others requesting that they take up the bills to lobby to get them passed. 

"Meeting these strict substantiation requirements burdens the business use of cell phones, dampens the use of advanced technology and is impractical given their frequent use in a fast-paced global work environment," the coalition wrote in their letter, dated May 5.


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