I just read something over on the Wall Street Journal that is kind of ticking me off. The IRS is contemplating charging federal income tax on employees who use corporate wireless devices because they want to better enforce a 1989 tax law that sees mobile phones as a fringe benefit.
If an employer provides a cell phone to an employee, and the employer acquires and pays the costs of using the cell phone, the employee receives a fringe benefit. To the extent that the employee uses the employer’s cell phone for business purposes, the fair market value of such usage qualifies as a working condition fringe benefit excludable from the employee’s gross income and the cell phone expense is a deductible business expense for the employer, provided that the substantiation requirements of § 274(d) are met. However, to the extent the employee uses the employer’s cell phone for personal purposes, the fair market value of such usage is includable in the employee’s gross income.
To make a long story short, if your company provides you with or reimburses you for cell phone use, you, may need to send the tax man a little extra cash every April 15th.
I’ve got just 5 words… Are you frigging kidding me!
This law made have made sense 20 years ago when companies had just a few people walking around with Zack Morris style cell phones that cost $1.25 per minute, however the law is completely outdated for the way the mobile work forces operate today. If you start telling employees that they’ve got to pay taxes on corporate mobile phones you are going to either have to pay them more to offset the additional tax burden, or, see productivity take a nose dive.
If you have a WSJ subscription, you can read the entire article here. ZDNet has a nice write up on the article here in case you don’t.
The law’s the law. It might have been spot on when it was legislated. But cell phones are now an indispensable business tool, not a “fringe benefit.” This law needs to be changed. If the IRS gets anywhere on this, they’ll end up regretting it because the backlash will be wicked, and people might start looking at other stupid laws…
Haa! Haa!
When I get paged in the middle of the night for an outage, it sure doesn’t feel like a fringe benefit.
My company also provides laptops to its employees – are we going to have to cough up for those too?