Employer Provided Cell Phones

Employer Provided Cell Phones

Reimbursements and Allowances Information and Guidance

The IRS issued a significant announcement regarding cell phones on September 14, 2011.
Notice 2011-72 (IR-2011-93) stated that an employer-provided cell phone will not be taxable to an employee when it is provided primarily for substantial business reasons (other than as an employee benefit) and the reasons for providing the cell phone must be non-compensatory. This eliminates any need to track business/ministry calls versus personal calls. Complete exclusion from taxation, without any allocation between business and personal use, only certainly applies when the employer provides the cell phone.  The exclusion for personal use in the notice is based on personal use as a de minimis non- cash benefit, and does not directly apply when the employer pays cash.

Other issues to Consider

Resources

The following list of resources related to employer cell phones was compiled and distributed by University Audit in 2012.

IRS Notice 2011-72, Tax Treatment of Employer-Provided Cell Phones, Issued September 14, 2011, Retroactively effective after December 31, 2009

This notice provides guidance on the tax treatment of cellular telephones or other similar telecommunications equipment (hereinafter collectively “cell phones”) that employers provide to their employees primarily for noncompensatory business purposes.

IRS Interim Guidance on Reimbursement of Employee Personal Cell Phone Usage in light of Notice 2011-72 - Guidance to IRS Examiners

The purpose of this memorandum is to provide audit guidance to examiners regardingemployers that reimburse their employeesfor the business use of an employee’spersonal cell phone. This document is not intended to be a technical position, but toprovide guidance to examiners who encounter this issue.

NACUBO Article – Allowance via Payroll Guidance

NACUBO Summarizes the September 14, 2011 IRS guidance on the tax treatment of employer-provided cell phones. The notice explains that generally, if a cell phone is provided to an employee for “noncompensatory” business purposes (the cell phone is not considered part of the employee’s compensation, but intended to facilitate work outside the office or office hours), both the business and personal use of the phone will be nontaxable and no substantiation will be required. The guidance applies retroactively to any use of an employer-provided cell phone occurring after December 31, 2009.

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