IRS Eyes Taxing Your Work Cell Phone

The IRS wants to tax the use of cell phones issued to individuals as a fringe benefit.

According to a Reuters report, IRS is looking for ways to improve compliance of a tax that has been on the books for two decades.

A law dating to 1989 requires companies seeking to deduct worker cell phones as an expense to track personal use with painstaking documentation of minutes. The IRS this week issued a notice seeking public comment on ways to revise the current system. Options include letting employers deduct the entire sum of a worker's cell phone use if a worker can establish she uses a personal phone for some period, and letting employers use statistical sampling to generalize about usage.

The Wall Street Journal reports "The Internal Revenue Service proposed employers assign 25% of an employee's annual phone expenses as a taxable benefit.".

The question for the cell phone industry, particularly companies like RIM, which sells its Blackberry primarily for business use, will see any drop off in sales if the IRS is effective in enforcing the rule.

The tax could end up being "regressive," thereby decreasing use of the thing it wishes to tax. That still could bring the IRS revenue, but it may make some people think twice about how and when they use cellphones.

A recession makes for odd notions from the government about how it can raise income to offset deficits. Maybe cell phone use will lower the national debt.

(June 12, 2009)

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