Company Cell Phones & IRS

The federal government instituted a tax law in 1989 that was basically ignored and never enforced. Now, the Internal Revenue Service is proposing a stricter rule of the 20-year-old measure that is designed to determine the taxable benefit for small business owners and employees who do not itemize the number of cell phone calls that are made on company time and those that are personal in nature. The end result could mean that employees who are in the 28 percent tax bracket could be liable for about another $100 in federal taxes.

Although those who are in the upper tax bracket can certainly afford an extra $100, I think it is important to re-examine the original intent of the IRS rule
. Twenty years ago, there were not 200 million cell phones in use in the United States and nobody could have predicted (other than those in the cellular phone industry) that most everyone would own a cell phone. As a result, it has been nearly impossible for any worker for a firm that provides them with a company cell phone to accurately differentiate between a business or personal call. In fact, I would argue that the time spent by company finance managers sifting through employee cell phone records to determine what calls are for personal or business use is a waste of time relative to the cost of not allowing employees flexibility with their cell phone usage.

For example, if I wanted to call the local day care center on my company cell phone and let them know that I was working late, is it a company call since I am still working? Or, is it a personal communique' to alert the day care provider that I may not be able to pick up the child at the agreed-upon time? Likewise, if I wanted to make a tee time at a local golf course with other business associates on the company phone, should I tell my supervisor that I am making a quasi-personal call, even though the meeting on the links may result in a potential sale that could benefit my employer?

Either way, the cell phone has become so much of our daily life that it is difficult to determine what is company time or personal use.
On the other hand, there are many business owners I know who request that their employees only use their business cell phones for company-related discussions. That is understandable - to some extent. In fact, those individuals who are told by their boss to avoid all personal calls on their company-provided cell phone often elect to use their own cell phone so they are not using their employer's money for personal gain.

However, once again, government is 20 years behind the learning curve and should not enforce laws that are outdated. Potential tax revenue methods that costs business owners more money to monitor and record versus the expected windfall for the government are only another burden on those who already pay their fair share of taxes to begin with.

I suppose most small business owners could avoid the potential conflict by not allowing valued employees to make any personal calls on company phones. Personally, I don't think that is reasonable in 2009. In the meantime, the IRS will hold public hearings on the issue this fall. In other words, more money and more time will be spent about something that was a bad idea from the beginning.