IRS Taxes Personal Use of Business Cell Phones

June 17,2009

Though the idea to tax personal use of business cell phones was created in 1989- after the birth of the cellular phone, lawmakers and the IRS believe that it is time to update the laws. Because phones and plans are much cheaper, the regulations regarding their use for personal purposes require a facelift.

The following ideas have been proposed by the IRS:

·         Minimal personal use method. Under this plan, 75 percent of work-cell phone use would be considered business, and the remaining 25 percent, personal. For an individual in the 35% tax bracket, with a $500 cell phone bill, the tax on 25% of that bill would amount to $43.75

·         Safe harbor substantiation method. This method allows employees to provide proof that they supply their own personal cell phones during working hours so that there is no question of personal use of the employer's phone.

• Statistical sampling method. This method lets employers determine personal use by figuring the average personal use for all employees.

The IRS is expected to comment on a specific strategy on or before September 4, 2009.