Friday, June 12, 2009

Who You Gonna Call?

Just in case you didn't think doing your taxes was already complicated enough comes news that the IRS wants to tax your corporate mobile phone:

The use of company-issued mobile phones could trigger new federal income taxes on millions of Americans as a "fringe benefit."

The Internal Revenue Service proposed employers assign 25% of an employee's annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax.

The IRS, in a notice issued this week, said employees could avoid tax liability if they showed proof they used personal cellphones for nonbusiness calls during work hours. The agency also could decide on a set number of phone minutes as "minimal personal use" that would be untaxed.

In a third option proposed by the IRS, employers could use a statistical sampling to determine what portion of workers' cellphone use is personal and how much is work-related. Workers would be taxed on the difference.

Gee that sounds great. All I have to do show "proof" that I used personal cellphones for nonbusiness calls during work hours or my employer can use precious resources to conduct a statistical sampling to determine how much I should pay? Yeah, that doesn't like either a total nightmare for the individual or a cost-increasing, productivity-dampening process for the employer.

While the IRS looks at this as a potential revenue windfall, the actual outcomes will be that companies will stop issuing cell phones to workers instead asking them to submit expenses when they use personal cell phones for business and/or individuals deciding to not use their business cell phones as often less they risk incurring an additional tax burden. Either way, NO ONE wins.

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