The Proposed Cell Phone Tax

June 15, 2009 | Subscribe to our RSS Feed

The IRS has recently proposed taxing employees up to 25% of the value of their work cell phone.

A 1989 law treats employer-provided cell phones as a taxable fringe benefit, so this new proposal is to make it easier to enforce this law. However, several issues arise, making it seem more of a burden to employers and employees, rather than a clarification or simplification.

For instance, if the IRS deems 25% of cell phone use to be personal and limits deductions for the employer to 75%, the 25% would have to be considered as part of the employee’s gross income. Now we’re talking income tax and payroll tax implications.

And what about self-employed people? They are documenting every single business call. As it stands, this won’t really ease their burden.

Keep in mind what cell phones, and the cost of calls, were like in 1989. We will hear more on this.