WASHINGTON – Company-issued cell phones might feel like a tether to the office even in workers’ off-hours. The phones also are a taxable fringe benefit, and the Obama administration wants to change that.
The administration has asked Congress to repeal the widely ignored tax on the personal use of company cell phones, saying it is outdated and difficult to enforce. The request Tuesday came a week after the Internal Revenue Service caused an uproar when it sought ideas for how better to enforce the law.
A 1989 law says workers are supposed to count the value of personal calls on a company cell phone as taxable income. The cell phone tax, however, can be a pain for workers who increasingly use mobile devices for texting, e-mailing and browsing the Internet – sometimes for work, sometimes for personal use.
“There’s been very uneven enforcement, said Marianna Dyson, a former IRS lawyer who now is an employment tax and fringe benefits expert with Miller & Chevalier in Washington.
“I think most employers are reasonable. But do I see employers requiring employees to document every single business call?” Dyson said. “It’s administratively burdensome.”
IRS Commissioner Doug Shulman said the tax is “poorly understood by taxpayers” and acknowledged it is difficult to consistently enforce.
“The passage of time, advances in technology and the nature of communication in the modern workplace have rendered this law obsolete,” Shulman said in a statement.
Shulman said he and Treasury Secretary Timothy Geithner were asking Congress to repeal the tax. The House passed a bill to repeal the tax last year, but it stalled in the Senate. This year, bipartisan bills have been introduced in both chambers.
Industry representatives said they were pleased that the IRS changed its position.
“We just think that this law was put into effect in a bygone era,” said John Walls, vice president of public affairs for CTIA-The Wireless Association, a trade group.
