IRS wants more; this time from your cell phone
June 16, 2009 by Sam NarisiPosted in: Regulations & Compliance, Special Report
The IRS’s new plan for raising funds would likely create a big administrative nightmare for employees and businesses.
The proposal: to start collecting taxes on the value of personal calls, text messages, and downloads made on company-issued cell phones. In other words, anything an employee does on an employer’s phone that’s not directly business-related would be considered a taxable benefit.
The idea isn’t new — in fact, it’s technically the law already. But that law was passed in 1989, when phones were the size of bricks and cost around $2,000. Service was hard to come by and calls were $3 a minute. Very few employees were given cell phones, and they were rarely used for personal calls.
Then when the phones (along with BlackBerries, iPhones, PDAs, etc.) became ubiquitous (and relatively cheap), it made little sense to make employees keep detailed records every time they use a company-owned device — that is, until the IRS became desperate for revenue.
Now, the agency has put forth several proposals to begin enforcing the old law.
Employers are fighting back, looking to avoid the administrative burden that would be forced on employees, IT staff and accounting departments. Some members of Congress have listened, and they’ve introduced bills to repeal the 1989 law altogether.
They claim cell phones are no longer perks or luxury items — they’re tools many employees need to conduct business. They also question whether the lost productivity spent sorting through call records is worth the few extra dollars for the IRS.
In response, the IRS has offered to simplify the record-keeping process with three alternative methods:
- Consider 75% of phone use to be work-related, and the other 25% to be personal, across the board. All employees would pay tax on the 25%, regardless of how they use the phone.
- Let employees prove they have a personal cell phone they can use during work hours. Then they wouldn’t be taxed at all for the work-issued phone.
- Have employers take a statistical sampling to determine employees’ average personal use.
The IRS will start taking public comments about those proposals on September 4th. We’re guessing they’ll get a lot.
Tell us what you think in the comments section below.
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Tags: cell phone, IRS, taxes
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June 17th, 2009 at 9:49 am
Tobacco tax, alcohol tax, now cell phone tax?
I didn’t contribute to anyone’s problem but I now pay more for cigars and booze, and now my cell phone?
This government needs to get their shit together financially and stop nickel & diming the citizens of this country to compensate for their mistakes, PERIOD
June 17th, 2009 at 11:03 am
Perhaps they will balance any perceived tax burden as negated by the time spent on work-related calls/usage during personal time. I mean, nobody spends time on work outside of the 9-5 daily grind .. right? How ludicrous – micro-managemetn by government at best.
June 17th, 2009 at 11:09 am
If this is allowed to be enforced, where will it stop? Taxing our non-business use of the internet/pc at work? how about companies that allow you to take company cars home? Oh I know…how about a mandatory tax for all employees who work in an office, as the IRS knows we all take office supplies home for personal use right??
C’Mon!!! Really?? I thought this was a government for the people by the people. It’s time we people threw out all of government and started over…SERIOUSLY! Either that or move out of the country. Canada looks nice from here.
June 17th, 2009 at 12:20 pm
Next they will tax the air that we breath.
The power to tax is the power to destroy.
June 17th, 2009 at 1:38 pm
First, my boss dictated that each of us get a cellphone. We had no choice in the matter. He discovered that it was more economical to have us make long distance calls on the cellphones than on landlines. And, he wanted me to be more reachable when I am on the road or away from my desk, which is most of the time. Second, I almost never use the cellphone for a personal call; I was one of the last people in the world to get a cellphone. Third, any personal calls I make are to my family; I specifically requested a Verizon phone, so that calls to my family would not incur any charges – we are all on Verizon. Most of my “personal” calls are of this nature – calling my wife to let her know that I am starting the drive back from a business trip to another city, and the time I should arrive home; i.e., it is directly related to work and safety. Lastly, the cellphone has made me much more more productive and more accessible when I am traveling or on leave; colleagues don’t even realize that I am away from the office. Since fair is fair, will the IRS arrange to have me reimbursed for all that time and effort spent on work when I am with my family or recuperating from surgery?
June 17th, 2009 at 2:03 pm
I cannot believe the IRS! They already tax the crap out of everything. What a bunch of BS!!! How about cutting some of their salaries and benefits!!! I’ve got to believe this is coming straight from the President (Obama). First it’s taxing Health Care Benefits, upping the taxes on gasoline, throwing money at big business while they take luxury trips to wherever with the stimulus money!!!! BooHoo big business you brought it on yourself!! In the mean time people are losing jobs, their homes, cars, etc…. and the economy stinks. Let’s take more money away from the middle and lower class!!!
June 17th, 2009 at 2:07 pm
I have a company phone. our company already pays a bill for the service for which we use. so why should we be paying any type of taxes. half the time our service is no good, we loose contatct. why don’t the IRS do something about the connections that people keep loosing. And then the tax proposal may be suitable for companies who do rely on the cell phone for business purposes. It get very fustrated to talk on a cell phone doing a business call and you loose your connection. what is being done about that. (nothing) but now you want to raise fund by trying to issue taxes. Do something for the companies who use the cell phone and do make pesonal calls, and then you can have a choice on tryng to get the tax bill. which is wrong because companies pay enough for the service itself for phones who loose the connections all the time, which you should be able to receive a call anywhere.
June 17th, 2009 at 3:31 pm
YEAH… I CONSIDER THIS A REAL STIMULATION TO EMPLOYEES ECONOMICALLY….
HAVE THEY EVER LOOKED AT SOME OF THE ENVIRONMENTS IN WHICH THESE EMPLOYEES WORK. ONE PHONE IS ENOUGH OF A DISTRACTION… FOR SOME EMPLOYEES TWO PHONES COULD BE A REAL HAZZARD. BUT OF COURSE THAT DOESN’T MATTER TO OUR GOVERNMENT AS LONG AS THEY GET THEIR MONEY.
June 17th, 2009 at 4:09 pm
How about billing the IRS for the lost business hours / worker productivity? This would more than offset the tax, no matter which of the methods used. I have a company provided phone. It is on 24/7 — just in case I’m needed. I do send and receive personal calls, but that is not even the 25% range. I loathe the telephone and see it as a necessary (evil) tool for my job (IT Manager for 9 locations). I use my home internet connection to VPN in on weekends and after hours — should I keep the records and claim this as unreimbursed business expense?
I’m farily certain my circumstance is not unique.
June 17th, 2009 at 4:15 pm
Some of us don’t consider our work phones a perk! They are a necessity – I am required to have a cell phone so that I can be contacted at all times. Of course I use the phone for personal use but only with free minutes. I pay for texting myself. I used to carry 2 phones – mine and work. It became a huge pain to always carry 2 cell phones. IT people usually need to be contacted at times when they are not at their desk or at home – when something is down you need to be notified at once. School districts don’t have people staffing our IT department 24/7 but we do have people in the buildings or doing work from home at all hours thus the need to be contacted. The same goes for our administrators, maintenance and custodial staff. We are only alloted so many minutes and if we go over we would then be billed for them by our district, which we all sign an agreement to when we receive our phones.
Congress needs to get into the 21st Century – some jobs a cell phone is a necessity. What are they going to do next – charge you taxes if you have a company provided computer? Many people have work laptops – I’m sure they access the internet for personal use – would they be taxed on that?
I see many people with a company provided shirts – do they have to take it off the minute they leave work? No they sometimes wear them to the store etc. Should they be taxed on these too – The shirt isn’t usually supplied so the company knows who should be there or for employees so they don’t ruin their shirts!
Kindercare doesn’t charge their employees for lunch if they eat with the children and the same thing the children eat – will they be taxed on this!
June 18th, 2009 at 8:18 am
I think if they start enforcing any part of this I will be turning in my company phone and letting ppl contact me via my personal cell. Sounds like we need another T.E.A. (Taxed Enough Already) party — the feds obviously didn’t get the message from the last ones.
June 18th, 2009 at 1:34 pm
Get rid of the IRS and all the leftest in Washington! Vote Conservative. They are taking away our Freedoms junks at a time.
June 19th, 2009 at 7:30 am
If this were to happen, you would see small busineeses stop providing phones. This would become a tremendous burden. The cost to track would be more costly then the tax.
June 19th, 2009 at 7:40 am
The proposed IRS cell phone taxation opens many other issues. Here are two that need to be considere.
1. It is already dangerous using cell phones while driving. I use a bluetooth. Am I to use two bluetooths and two cell phones and please conisder those who do not use hands free devices. The danger and distractions while driving will cause many more deaths and injuries regardless of any laws passed regarding cell phone use and or hand held devices.
2. If the business cell phone is taxed for personal, in turn we should be able to get rid of our business phones in our home and receive a similar credit for use of our personal phones for business use.
June 19th, 2009 at 8:03 am
I still have my personal cell phone. Does this mean that I don’t need it anymore and I can spend up to 25% of my time on personal business if I use the company cell phone, or that I can get a personal tax break if I keep it. (just kidding).. Personally, I object to my government wasting my tax dollars pursing things like this that will reduce productivity and add overhead costs to my employer.
June 19th, 2009 at 10:22 am
I think quite a few of us employees (hard working Americans) could tell the government how to get more money for our economic means without taxing the hell out of the hard working individuals paying their salaries.
1. Quit bailing out big industry and letting them use our tax dollars for their luxury items and vacations. I’m quite certain there are plenty of Americans who would like to know just what an all expense paid vacation feels like… hell I’d just like to know what a vacation feels like.
2. Quit paying such high wages to government officials… let the people vote their pay raises… hell me, as well as every white collar worker in America would love to vote in our next pay raise. It really sucks when you have a government official voting his self a 30% pay raise yet he doesn’t want to give a soldier even 3%… where is the justice in that? When was the last time a government official was willing to put his life on the line for someone he/she doesn’t even know? Stop the retirement pay to government officials..if you didn’t spend 20 years on the job you sure as hell don’t deserve for us to be paying for your comfort for the rest of your life. You have elderly men and women with nothing who poured their sweat and tears into a hard life of work and now have nothing; yet we have no problem paying a government official (that only spent six years on the job) half his/her pay (with the raises he/she voted in) for the rest of their lives. Talk about something for nothing!!! (try enforcing the Economy Act of ’33)
3. Start taxing the crap out of imports into this country.. if a business leaves the USA because they can make something cheaper in another country where they do not have to meet OSHA, EPA or labor standards that are imposed on domestic manufactures then impose an OSHA/EPA/Labor tax in addition to all other taxes on their import.. don’t make it profitable for them to take the jobs away from hard working Americans… if a product doesn’t meet American standards…tax it… keep the crap out of this country or at least make it so they compete on equal ground with our manufactures.
4. Stop spending money we don’t have… You can not keep spending money that isn’t in the bank and then wonder about the debt… You hear all these people making comments about the working class that’s losing their homes or cars that they shouldn’t have spent beyond their means. A lot of these individuals were in their means until the company they worked for cut them lose and moved production to a third world country so they could produce a lower quality item at a third of the price but still keep the same name on it. Guess what? The government is spending beyond their means only they doing it with every tax payers signature on the line.
5. Bring back the CWA (Civil Works Administration) and WPA (Works Progress Administration. Get rid of welfare. If you want assistance and are not already working a job then you should be willing to work for it, even if that means cleaning the sides of the roads or digging ditches. If you aren’t willing to work, you aren’t willing to eat off my tax dollar. Assistance should be equal across the board and not based on sex or color. Single dads need assistance just the same as single mothers and Americans are Americans doesn’t matter their race or heritage..if they are truly in need of assistance and willing to work then by all means give them the assistance. NOTE: Welfare was meant as assistance/aid/help not as a means of existance.
6. Stop paying to rebuild other countries… This is one I’ve never understood… We helped rebuild Japan after the war, why???? Can anyone tell me the economics in that? We spend tax money to fight an enemy that attacks us on our own soil and then spend more tax money to rebuild their country. Did they ever pay to help rebuild our country (they did bomb Pearl Harbor)? I don’t recall learning about a big pay out from Japan in my American History class. I’d also like to add something here… don’t start something we aren’t willing to finish.. (I say this from the stand point of an ex-soldier and proud mother of a US Marine). Don’t go into a country saying you are there to help their innocent citizens and then pull out before the job is done… many civilians put their lives on the line to back America and when we leave before the job is done they are the ones left to suffer the consequences… it’s all well and good for a government official to get voted in on the platform of brining our children home but what are the consequences of doing that before the job is done, not just to the civilians and refugees that supported us in our efforts but to our country? Don’t spend our tax money and risk our families lives if you aren’t willing to finish the job because the soldiers are the ones on the front lines, they are the ones seeing the innocent people they are protecting and fighting for, they want to finish their job.
NOTE: The American Revolution (Boston Tea Party) was based on taxation without representation… there is way more of that going on in this country now than there was back then. Why are we so willing to accept it now?
June 19th, 2009 at 10:38 am
This is completely outrageous on so many levels. The time wasted in government just thinking about something like this is pure stupidity. But it seems extremely consistent with all the other socialist proposals going on in Washington these days.
Our President (and I use that term loosely and with great anxiety), and our Democrat majority Congress have but one agenda. Stick their hand in your wallet if you make more money than a GD postal worker, and give your money to the lower class in order to raise the bar for the lower class, eventually eliminating the middle class. We’ll have two classes, the extremely wealthy, and the poor. Sound like any countries you’ve heard of before?
The scheme is this, the lower class are inherently under educated as a group, and easy to entice into entitlement programs (I;m not stereotyping, this is history). Ultimately, if they have their way, big government will be the only wealthy left among us, and the lower class will be led around by their food stamps.
June 23rd, 2009 at 10:21 am
[...] we reported last week, the IRS proposed a plan to start enforcing a 20-year-old law that classifies personal [...]
July 2nd, 2009 at 4:12 pm
Let’s cut to the chase: ABOLISH THE IRS as it currently is and go with a national sales tax. Keep some portion of the current IRS staff on to handle the national sales tax and the rest can actually go do something productive instead of facilitating the theft of wealth from those that do.
Since the criminals and incompetents in Congress won’t show restraint and balance a reasonable budget let’s take away the universal purse of screwing (taxing that is) the middle class and small business to death while the other two ends of the financial spectrum pay nothing and get handouts.
November 11th, 2009 at 10:10 am
OK, what is the tax going to pay for exactly?
November 22nd, 2009 at 10:47 pm
I’ve been active in taxations for lengthier then I care to admit, both on the individualized side (all my employed lifetime!!) and from a legal point of view since satisfying the bar and following tax law. I’ve offered a lot of advice and righted a lot of wrongs, and I must say that what you’ve put up makes impeccable sense. Please persist in the good work – the more people know the better they’ll be outfitted to deal with the tax man, and that’s what it’s all about.
January 6th, 2010 at 2:58 pm
Forget cell phones! I have a master plan for dealing with the IRS. It is called Flat Tax.
Let’s say for argument that a Flat Tax would be assessed at 20 percent.
For those of us who work for companies and get a W-2 at the end of the year. The company pays us X wage and 20 percent of it is payed to the government at each paycheck.
At the end of a year (or other deadline) our companies would have already been paid our 20 percent of our X dollars paycheck directly.
This means we (in theory) should not have to file a return if we have no other income because Uncle Sam already has our 20 percent. Think of how small the IRS would now need to be with 65% of citizens just having their flat tax paid in by the company for which they work. 65% less IRS? That would save some money right there.
My last penny theory on what is wrong with America (maybe the world?):
The vast majority of congresspersons and senators started as lawyers. When lawyers go to college they learn to research legal documents to find similar cases on which to argue. They are not taught much math or science which requires analytical skills.
Also realize that if lawyers are writing contracts or going to trial in civil or criminal cases, the faster a decision is reached the less money they make. So, lawyers don’t have much in the way of analytical or technology skills. This makes creating or deciding on technical issues beyond them.
Lastly, lawyers money stream ends with a decision. This means that don’t make as much money when things get decided, they make money in the debate. If you doubt this, try to get a no-fault divorce anywhere. If you and your spouse have it all worked out to your satisfaction, see if a lawyer doesn’t stir the pot and have you screaming at each other in court. Less money for you, more for both lawyers.
Doctor Digital’s $.02
January 7th, 2010 at 11:21 am
Here’s a thought for you. Why doesn’t the IRS tax congress (individually) on each piece of legislation which they support that spends taxpayer money? That could slow the bloat of government such that the IRS doesn’t have to nickel and dime taxpayers like this.
January 13th, 2010 at 1:16 pm
I am a contract employee and the client company supplies me with a Land Line. I have no control over the “service” or the expense for that Land Line. I do sometimes use that for personal calls. I do not see a difference between that and the use of a cell phone, should I pay tax on the percent of use for the Land Line?
If I am to pay tax on the service for my employer provided cell phone usage that tax would be based on the underlying provider and plan my employer decided to use, a decision I have no input in. If I have to pay tax on 25% then I want to have input in to the provider and plan which the 25% is based upon.
Not too many companies are providing cell phones as incentives; as a matter of fact I believe them to be a disincentive. If the company is going through the expense of providing a cell phone then they do so expecting that to improve my productivity and to be able to reach me after hours. They expect a benefit for the company and stock holders not for me. Lean is the name of the game; if there were not a benefit for the company they would not provide the phone. Let the employer pay the tax, if they don’t want to pay it then they don’t have to provide the phone.