Employer Provided Cell Phone
Almost one year after the IRS removed cell phones from "listed property", they have finally explained how this affects both employers and employees who have cell phones that are paid for by their employer.
When an employer provides an employee with a cell phone for business reasons, neither the business nor personal use of the phone result in income to the employee, and no recordkeeping of usage is required. And, in most instances, an employer's reimbursement to an employee for providing a cell phone for bona fide business use won't be taxable. This guidance applies for all tax years after December 31, 2009.
Prior to December 31, 2009, if an employer provided or reimbursed an employee for a cell phone, the employee would have to include the personal use portion of the cost of the phone and service in their income. In addition, the employee would need to keep records showing the amount of time the phone was used for business purposes vs. the amount of time used for personal calls.
The main caveats for the new treatment are that providing the cell phone is for noncompensatory business purposes, the cell phone plan is reasonably related to the needs of the employer's business, and any reimbursement for an employee's cell phone plan is calculated so as not to exceed the expenses actually incurred by the employee in maintaining the cell phone.
In my opinion, this is a result of cell phones costing much less than in previous years and the cost of monthly service being reduced to the point that it would cost the IRS more money to enforce the personal use rules then they would ever collect from enforcing them.
