November 21, 2009

Should Mobile Phone Use be Taxed?

When you receive a mobile phone for work purposes from your employer, it is not uncommon for you to make and receive personal calls on such a phone. You might not be aware of it, but there is a little-known law that requires taxpayers to pay taxes when using mobile phones provided by their employers for personal use. In 1989, the IRS listed the mobile phone as 'taxable' listed property and the law at that time stipulated that if there are no records of business and personal calls made on a mobile phone, part of the cost of the phone service is taxable and to be paid by the employee. However, at that time mobile phones were not as common as they are today. It was quite easy to trace owners of mobile phones and distinguish between personal and work-related use. But the situation today is very different, hence there is a need to repeal this law.

Businesses today provide their employees with mobile phones so that they are easily contactable especially in emergencies. The law as it stands now is impractical does not adequately address the needs of businesses today. In June, the IRS asked for views on the mobile phone law so that it could come up with a contemporary version that is more suitable for the times.

One proposal is for the IRS to assume a flat 25% of all calls made on a business-provided mobile phone is of a personal nature and therefore should be taxed on the employee. Four members of Congress have introduced 2 bills earlier this year in which mobile phones and similar devices would be taken off the IRS list of taxable listed property. These two bills are differing versions of the Modernize our Bookkeeping in the Law for Employee's (Mobile) Cell Phone Act and are still in the committee stage.

Even IRS Commissioner Doug Shulman questioned the law in June, calling it 'burdensome and difficult for the IRS to administer consistently'. H added that, "the passage of time, the advances of technology and the nature of communication in the modern workplace have rendered this law obsolete".

At this point, the IRS is trying to simplify the rules because the current law is confusing to both employers and employees. What will come out of the various proposals received by the IRS remains to be seen.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Share and Enjoy: