Posts tagged as:

cell phone usage

IRS Fights Back on Cell Phone Issue

June 16, 2009 · 6 comments

The IRS is fighting back on the cell phone issue – only someone forgot to call their PR person first.

As blogged earlier, the IRS has asked for feedback on its proposal to set more specific rules for the taxation of personal use of cell phones. The current rules require the entire “value” (whatever that means) of the cell phone to be reported as income to the employee unless the employee can provide records which justify a personal/business split.

Employers have fired back that phones have been provided for the convenience of the employer, not the employee, much like a landline and it would be impossible in some cases to distinguish between personal and business usage. In particular, bundled plans or unlimited minutes packages would not be affected by personal calls – from a cost perspective, the employer pays the same amount for the entire service whether it’s used for personal use or not.

Employees have expressed concern over the idea that they may be taxed on something beyond their control. If the phones are distributed as a condition of the job, and the employee uses it solely for business use, under at least one of the provisions of the IRS’ proposal, the employee would have to report a percentage of the bill as income.

The IRS has retorted that this is not about the employees but a clarification for the employer.

I’ll grant them that the old rule is confusing and overbroad. So fixing it is a good thing. But why not eliminate it altogether?

And if you keep it, don’t try to be slick and say that it’s not about the employee. It is most definitely about the employee. It’s called the potential to collect untaxed revenue. Seriously, IRS, we get it. You want our money. Stop trying to call it something that it’s not.

The IRS has even gone so far as to claim it has been approached by some businesses wanting it clarified to make it easier to have employees pick up the tab for their personal calls. Really? And which businesses are those? Right.

I don’t think that it’s escaped notice that the economy in 1989 (when the cell phone rule was first enacted) was eerily similar in many ways to today’s economy: shaky global currencies, government bailouts, banking crisis… The IRS was looking for more money then and it’s looking again now.

No, I’m not happy about the prospect of taxing personal cell phone usage, but let’s call a spade a spade: this isn’t about helping anyone out, it’s about bringing in more money.

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What’s next, a tax on each sip of office coffee?

June 16, 2009 · 3 comments

If the IRS felt that the announcement that they were looking for ways to resolve the “cell phone tax” issue would allay the fears of taxpayers, they were wrong. In addition to a buzz on the blogosphere, traditional journalists are taking the IRS to task on the matter. Today, the Wall Street Journal lead its Op-Ed piece with the incendiary question, “What’s next, a tax on each sip of office coffee?”

(*blink*)

I’m sorry. I was just contemplating the horror for a second. Nobody messes with my coffee.

You can read the entire piece by the WSJ here (registration may be required).

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Taxing Cell Phone Service: What Will It Cost You?

June 14, 2009 · 5 comments

Following up on my earlier post about the IRS taxation of cell phones, I’m curious to know what the average cell phone bill is for my readers. The cost of the phone service will be a consideration for purposes of taxation – I’m guessing the cost of the phone will be included, as well.

JD Powers claims that this amount is about $77/month. How accurate is that? Take the poll!


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