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Personal Use of Employer-Provided Cell Phones Not Taxable

 
Feeling guilty about using the company cell phone for personal calls?  Ever wonder if you should report this benefit to the IRS?  Well, worry no more… On September 14, the IRS announced in Notice 2011-72, that business and personal use of a cell phone, given by an employer primarily for non-compensatory business reasons, is nontaxable to the employee. Yup, that fancy Blackberry you received for work-related emergencies outside the office, or to talk to clients off the clock, is an excludable – and nontaxable – fringe benefit.

So, go ahead and answer your kids’ call and let them know what you are making for dinner tonight. Your employer is footing the bill, and you will not be taxed on the personal usage portion by the IRS.  Furthermore, you don’t need to keep track of whether you’re utilizing the phone strictly for business. The IRS won’t require recordkeeping of business use from taxpayers to receive tax-free treatment on their business assigned cell phones. Accordingly, any personal use of the cell phone also doesn’t have to be accounted for and is considered a “de minimis” fringe benefit.  However, this treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee’s regular wages.  Also, the guidance does not apply to the provision of cell phones or reimbursement for cell-phone use that is not primarily business related; as such arrangements are generally taxable. 

But what happens when your employer makes you use your own cell-phone for non-compensatory business purposes? In a related release, the IRS addressed employee cash allowances for work-related use of personally-owned cell phones. The cash reimbursements of employees’ expenses for reasonable cell phone service can be treated by employers as nontaxable items. 

Finally, remember that you can’t always keep your personal and professional lives separate. Having a company cell phone doesn’t help the matter — especially when your superiors believe you are on call 24/7.  Sometimes you just have to shut down your cell phone and enjoy your personal time off the clock.