IRS Releases Final Regulations on Tax Treatment of Employer Provided Cell PhonesThe IRS released final regulations (Notice 2011-72) on the tax treatment of employer provided cell phones (or other similar devices). The Notice implements the decision by the IRS and Treasury that any personal use of an employer provided cell phone is deemed to be a de minimis amount, and therefore not considered to be a taxable fringe benefit to the employee. However, the employer is required to demonstrate that the employee needs the cell phone in order to be contacted at all times for work related issues by the employer and/or have contact with clients after business hours.
The IRS also provided guidance to its field examiners on the issue of an employer reimbursing an employee for the business use of an employee’s personal cell phone. If the employer deems that the employee must conduct business after business hours and needs to use a cell phone device, then the reimbursement payment from the employer to the employee is also considered to be a working condition fringe benefit, and excludable from the employee’s income. However, the IRS notes that the employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer’s business, and the reimbursement must be reasonably calculated so that it does not exceed expenses the employee actually pays for maintaining the cell phone. The IRS provides examples of the guidance, including the need to monitor any significant deviations from a normal course of cell phone use and the amount of reimbursement.
IRS Notice 2011-72/Tax Treatment of Employer Provided Cell Phones: http://www.irs.gov/pub/irs-drop/n-11-72.pdf
IRS 2011-72 Guidance for Field Examiners: http://www.irs.gov/pub/foia/ig/sbse/sbse-04-0911-083.pdf
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