IRS Dropped Cell-Phone Tax Plan For Businesses

According to a report by the Associated Press, the Internal Revenue Service is backing away from proposals to more uniformly enforce a law that taxes personal use of employer-provided cellphones.

The Obama administration asked Congress on Tuesday to repeal a widely ignored tax on the personal use of company cell phones after sparking an outcry last week when it sought ideas for enforcing the law.

The 1989 law says that personal use of a company cell phone should be taxed like other fringe benefits. The law, however, can be cumbersome for workers who increasingly use mobile devices for texting, e-mailing and browsing the Internet — sometimes for work, sometimes for personal use.

"The current law, which has been on the books for many years, is burdensome, poorly understood by taxpayers, and difficult for the IRS to administer consistently," IRS Commissioner Doug Shulman said in a statement. "The passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete."

Shulman said he and Treasury Commissioner Timothy Geithner were asking Congress to repeal the tax, which has been widely criticized as outdated by the cell phone industry and lawmakers.

Just last week, the Internal Revenue Service issued a request for comments on ways to improve compliance with the law. One option suggested by the IRS would assume that personal use accounts for a quarter of the phone's overall use. Another would require workers to document their personal use of company cell phones.

"Some have incorrectly implied that the IRS is cracking down on employee use of employer-provided cell phones," Shulman said. "To the contrary, the IRS is attempting to simplify the rules and eliminate uncertainty for businesses and individuals."

Howard Woolley, senior vice president with Verizon Wireless, told the Associate Press that a cell phone is no more of a fringe benefit than a desk phone, especially when many employees are expected to be on call at any hour.

In the AP report Wooley said, "There are certain types of employees that you want on the job all the time. The last thing you want is a worker sitting around all day trying to figure out which calls were personal and which ones were business."

(June 17, 2009)

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