Under new IRS guidance, for years beginning after December 31, 2009, when an employer provides an employee with a cell phone for noncompensatory business purposes, the IRS will treat the employee's use of the cell phone as a working condition fringe benefit, the value of which is excludable from the employee's income. Similarly, the IRS has determined that any personal use of a cell phone provided for the same reasons is considered a de minimis fringe benefit, and as a result, is excludable from an employee's income. Examples of noncompensatory business purposes may include the employer's need to contact the employee at all times for work-related emergencies, the employer's requirement that the employee be available to speak with clients at times when the employee is away from the office, and the employee's need to speak with clients located in other time zones at times outside the employee's normal work day. Adversely, cell phones provided to promote the morale or goodwill of an employee, to attract a prospective employee, or as a means of furnishing additional compensation to an employee is not considered noncompensatory business purpose. As a result, the IRS will treat such cell phones as a taxable fringe benefit and the entire cost of the cell phone is included in the employee's gross income. Please contact us if you would like more details about this or any aspect of the new legislation. |
