Cell Phones and the IRS. Jeri Semer Executive Director ACUTA March 13, 2007 NEARMUG

Transcription

1 Cell Phones and the IRS Jeri Semer Executive Director ACUTA March 13, 2007 NEARMUG

2 About ACUTA Nonprofit international professional association founded 36 years ago Represents communications technology professionals Over 800 Institutional members, 175 Corporate Affiliates

3 Primary ACUTA Activities Professional education and development: Events, Web-based based seminars, Publications Monitoring and commenting on federal regulatory issues Peer networking via listserv and events Representing communications technology with media, higher education orgs, industry and government More info at

4 Important Cell Phone Regulations IRS: Are Cell Phones Taxable Benefits? What are the applicable regulations? What procedures can your organization put in place? What are some alternatives regarding tax liability for your employees? What do employees need to know?

5 Important Advice After studying this information, check with tax counsel No one-size size-fits-all solution Important to seek advice from your organization s CPA and/or knowledgeable attorney, because individual situations vary and there have been conflicting court decisions.

6 Are company cell phones a taxable benefit? The IRS Code includes cell phones as listed property. General statement in Sect. 61 of Internal Revenue Code: Gross income includes, but is not limited to, all income including fringe benefits Personal use of an employer cell phone is considered a fringe benefit and generally taxable to the employee.

7 Are company cell phones a taxable benefit? Since 1989, cell phones have been considered listed property in the Internal Revenue Code, federal tax law. Listed property includes items obtained for use in a business but designated by the Internal Revenue Code as lending themselves easily to personal use. See definition at 1.html#d0e233.

8 Are company cell phones a taxable benefit? For a for-profit business, listed property affects depreciation deductions taken by the business and the computation of net income. Focus of this presentation is on the income tax implications for employees

9 Are company cell phones a taxable benefit? What can your organization do to exclude cell phones from taxable income? Key points: If the phone is used exclusively for business, and that is documented, it would not be a taxable benefit. The employee must keep records of cell phone usage, documenting business purpose Companies must have a policy requiring employees to keep records, and must regularly audit.

10 Are company cell phones a taxable benefit? If there is no personal use, and this is properly documented, the cell phone is not taxable income If there is partial personal use, personal calls must be reported to the employer. Employer must report the value of those calls and/or a prorated portion of monthly charges as income to the employee.

11 Are company cell phones a taxable benefit? In the absence of proper substantiation of business/personal use, the entire cost of the cell phone becomes personal income to the employee. Includes fair market value of the phone.

12 Are company cell phones a taxable benefit? What have some companies done? Prohibited any personal use of company cell phones. (This is required by state law for some state institutions.) Permitted personal use if the employee reimburses the organization for personal calls. In some cases, employees are required to reimburse only when costs exceed the monthly package.

13 Are company cell phones a taxable benefit? What have some companies done? Don t issue cell phones, but provide a monetary stipend to employees who are required to use cell phones for company business. That stipend becomes income to the employee, which they may be able to offset on their own tax returns with deductions for business use.

14 Are company cell phones a taxable Resources: benefit? IRS article at d=167154,00.html Search listed property at for numerous references for both for- profit and non-profit organizations.

15 Additional Cell Phone Considerations State and local laws regarding use of cell phones while driving Liability for auto accidents E-911 for cell phones

16 State/local laws regarding use of cell phones while driving State laws vary. As of Sept. 2006, four states and D.C. have enacted laws banning the use of hand-held held cell phones while driving (California, Connecticut, New York, New Jersey, and District of Columbia). They have different effective dates. Six states allow localities to ban cell phone use while driving (Illinois, Massachusetts, Michigan, New Mexico, Ohio and Pennsylvania)

17 State/local laws regarding use of cell phones while driving Company policy should reflect state and local laws, and clearly require employees to comply or face disciplinary action. Good source of information on state/local cell phone laws: The Insurance Institute for Highway Safety, es.html

18 Liability for Auto Accidents Employers should consider ways of reducing company s liability for cell phone- related auto accidents. Growing number of lawsuits over employer liability for employees talking of cell phones Many decisions holding employers liable Policies, training reinforcing those policies, and enforcement mechanisms can reduce accidents and help reduce liability.

19 Examples of Options for Cell Phone Use Policies Require compliance with state/local law Ban all cell phone use while driving on company time Require use of hands- free devices Prohibit cell phone use while driving in bad weather Require employees to safely pull over to take or make calls Train employees to avoid stressful conversations while driving Train employees to let incoming calls to go to voice mail when driving Prohibit in certain job descriptions Check with counsel for applicable HR and cell phones laws.

20 E-911 for Cell Phones Wireless E-911 E rules implemented in two phases: Phase I requires carriers, within six months of a valid request by a PSAP, to report the telephone number of a wireless 911 caller and the location of the antenna that received the call. Phase II requires wireless carriers, within six months of a valid request by a PSAP, to provide more precise location information (the latitude and longitude of the caller. Must meet FCC accuracy standards (accurate to within meters).

21 FCC rules require all analog-capable handsets manufactured after February 13, 2000 to use a Commission-approved method for the processing of E-911 E calls. Some carriers have requested and received waivers check with your vendors.

22 Questions? Contact information: Jeri A. Semer Executive Director, ACUTA , ext