Business Cell Phone Tax Obligations
急速PC28彩票Until the passage of the Small Business Jobs Act of 2010, businesses faced burdensome and complicated cell phone tax obligations because cell phones were considered a fringe benefit by the Internal Revenue Service. This classification meant employees must either pay taxes on the value of the phone and service or that a company must keep detailed records demonstrating that a phone saw only business use. The 2010 legislation nodded to the necessity of cell phone usage in many businesses and streamlined the tax obligations surrounding it.
While the cell phone itself was removed from the fringe benefits classification by the IRS, the service connected to the cell phone remains a fringe benefit. However, IRS memo IR-2011-93 clarifies that reasonable charges for cell phone service used by an employee are also considered nontaxable when a device is used "primarily for noncompensatory business reasons." As long as the phone receives primarily business use, the service fees paid do not count as taxable compensation for workers.
急速PC28彩票While an overabundance of personal use of a business cell phone would not be appropriate for tax filing purposes, the IRS allows that personal calls can take place on a business cell phone without the need to tax employees for the value of the personal call. The IRS classifies this as a "de minimis fringe benefit." As long as a phone is issued and used primarily for business, a few personal calls no longer require additional paperwork or employee taxation.
Employers may also reimburse individual employees for the cost of a cell phone or cell phone service that falls within the new regulation guidelines. This reimbursement of funds is nontaxable provided the amount reimbursed is not excessive or used as a substitute for wages.
急速PC28彩票Despite the IRS no longer requiring detailed records for every cell phone call placed in a company, some records need to be maintained to justify the business expense of a cell phone. An archive of electronic bills that outline funds spent on employee cell phones and plans should be maintained for each individual cell phone.
Cell Phone Costs and Service Charge Deductions
急速PC28彩票The method of claiming the cost of a cell phone and its related service on an income tax return varies depending upon the tax filing structure a particular business chooses. For example, a sole proprietorship claims service charges for a second phone used solely for business as a utility expense on form Schedule C -- Profit or Loss From Business. The actual cost of the phone becomes a business expense claimed at total purchase value in one year or a depreciating business expense. The value of the phone and the amount of time it will find use in the company before an upgrade or replacement is required determines how the initial purchase price is written off.
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