Resources Download Reports Adapting to the Repeal of the Tax on Personal Use of Employer Paid Mobile Services
| Adapting to the Repeal of the Tax on Personal Use of Employer Paid Mobile Services |
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In 1989, cell phones were a luxury item and the government developed a complicated tax for wireless voice calls. Mobile “car phones” cost $350 to $700 and charges for calls of .50 or more per minute were common. Over the past 20 years, costs have fallen, but the U.S. tax code has not adapted to this new reality. This paper provides a timely review of the current tax and actions to take before the law changes. Under the current tax, employees must keep a record of each call, including its business purpose, its date, and time. Employers must assign a pro rata share of monthly service charges for each personal call and include its value in the taxable wages of employees. Most people agree that it is costly to maintain these records and distinguishing between personal use and business use is difficult. For example, are calls to let others know that you are running late at work, qualify as business or personal use?
In 2009, the Internal Revenue Service (IRS) asked for comments on proposals to simplify rules for documenting employee use of employer- paid mobile voice services. At the time, the Telecom Expense Management Industry Association (TEMIA) called for a broad approach and repeal of the law. The government now appears to have adopted our suggestions. Both the U.S. House and Senate have passed in identical form the bill: HR 5297: Small Business Jobs and Credit Act of 2010, which was signed into law September 27, 2010 by the President. It contains a provision that officially repeals the tax on cell phones. This report is available for free download to registered subscribers. Become a subscriber. Our Privacy Policy. |