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CCH® PAYROLL — 06/23/09

IRS issues statement on employer-provided cell-phones

In a statement issued on June 16, IRS Commissioner, Douglas H. Shulman addressed IRS Notice 2009-46 (see CCH Payroll Management Guide Report Letter No. 1290, dated June 16, 2009). The notice addressed the rules related to employer-provided cellular telephones and requested comments on ways to simplify compliance with those rules. In his statement, Shulman noted that “the current law, which has been on the books for many years, is burdensome, poorly understood by taxpayers, and difficult for the IRS to administer consistently.” He further noted that, while there has been a misconception that the IRS is “cracking down” on employee use of employer-provided cell phones, the IRS is actually attempting to simplify the rules and eliminate uncertainty for businesses and individuals.

The statement added that although some of the proposed changes found in the notice would add clarity, “the current law will inevitably leave widespread confusion among employees and businesses.” Therefore, “Secretary Geithner and I ask that Congress act to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers.” (IRS Newsroom, www.irs.gov.)

Lawmakers applaud IRS for addressing cell phone requirements

Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) and Representative Earl Pomeroy (D-ND), a senior Member of the Ways and Means Committee, applauded Shulman for his efforts to address a law that taxes an individual’s personal use of an employer-sponsored cell phone. Under current law, employees are required to keep a record of each call and the time it is incurred, as well as its business purpose. If the extent of personal use cannot be established, the entire value of the cell phone is taxable income to the employee. “I am pleased that the IRS is taking steps to address the tax treatment of employer-provided cell phones,” said Lewis. “The tax law is outdated as it stands now, and updating the law to keep current with technology and modern business practices is the right thing to do. Cell phones and BlackBerrys are a part of the modern workplace where employees are always on call. I look forward to working with Representative Pomeroy, IRS Commissioner Shulman, and my colleagues to address this issue once again. This law should be repealed.”

“I commend IRS Commissioner Shulman for supporting a change in the tax law to clarify that neither employers nor employees will face tax liabilities for personal use of company-provided cell phones,” said Pomeroy. “In today’s environment where we keep in touch 24/7, I hope the House of Representatives will vote once again to modernize the tax code to keep pace with workplace technology and clear this obsolete statute from the tax code. I would encourage the IRS Commissioner to announce a moratorium on the collection of taxes on the personal use of cell phones as the agency and Congress work to find a more practical solution.”

During the 110th Congress, Pomeroy was a lead sponsor of H.R. 5450, bipartisan legislation that would have eliminated the special requirements for individuals to keep detailed records of calls made on employer-provided cell phones. This provision was included in H.R. 5719, the Taxpayer Assistance and Simplification Act of 2008, which passed the House of Representatives in April 2008. Rep. Pomeroy and Rep. Sam Johnson (R-TX) re-introduced the legislation (the Modernize Our Bookkeeping In the Law for Employee's Cell Phone Act of 2009, H.R. 690) to address this issue in the 111th Congress.

(House of Representatives Document, Ways and Means Committee Press Release, June 17, 2009.)

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