Personal Cell Phone Calls + Business Calls = More Taxes

From Yahoo comes this article:

Make any personal calls on that company cell phone? That's a "fringe benefit" of your job, according to a 20-year-old law, and the IRS is looking to collect.

The Wall Street Journal reports that the IRS wants to step up enforcement of the 1989 law, which holds that employees who make personal calls on a company cell phone are getting a "fringe benefit" from their employers—a benefit that should count as taxable income.

The law has been "long ignored" by employees and employers alike, according to the Journal, namely because most companies don't have the time or the inclination to tabulate exactly how many minutes you're on the phone with clients versus how often you're gabbing with friends and family.

But now, the IRS is floating a couple of proposals to make compliance easier—for employers, anyway. One would be to simply treat 25 percent of your company cell phone bill as a "fringe"—and therefore taxable—benefit, the Journal reports. Or, an employer could use "statistical sampling" to guesstimate how many of your cell minutes are work-related and which aren't.

OK, but what if you swear on a stack of bibles that you rarely, if ever, use your company phone for personal calls? That's fine, the IRS says—but you'll have to produce separate work and personal cell phone bills to prove it.

Think it's a crazy idea? Apparently the IRS is thinking it over and will make a decision by September, the Journal reports.

Meanwhile, guess who's on your side against the IRS? The big cell phone carriers, who (according to the WSJ story) are worried that companies will drop employee cell phone contracts if the IRS goes ahead with its proposal. (Instead, employers might simply reimburse you for business calls made on your personal phone.)

So, quick show of hands: How many of you have a company-issued cell phone, and if so, do you use it for personal calls? And should personal calls count as a "fringe," taxable benefit? Or should the IRS allow for (at the very least) "minimal personal use" of company phones, especially given that bosses often expect cell-toting employees to be in contact at all times?

When I first started at Sonlight Church, each of the pastors had a "company" cell phone. I had heard that this would be a problem... especially trying to decide what was and what wasn't a business call. I proposed an allowance (which is reported as taxable income) for each pastor to offset the cost of their phones. This kept the church in accordance with the IRS rules on cell phone use in business settings.

For more information or the exact wording of the notice, please read it on Internal Revenue Bulletin 2009-23.