Monday, January 18, 2010

Something good from IRS

Cell phones used for business purposes currently are one of the “Listed” assets that IRS has special rules for. If you use a cell phone for business, there are draconian rules which you are supposed to be following that force you to document all of your calls and make a distinction between business and personal use. Personal use is deemed to be a taxable fringe benefit if the phone is provided by your employer or a nondeductible expense if you pay for the cell phone and try to deduct it yourself.

As you can imagine, people rarely itemize out a cell phone bill in order to reduce the available tax deduction. It would take too much time to analyze a year’s worth of phone statements, and many cell phone bills don’t list individual calls, only minutes of usage. Further, as cell phones get more sophisticated and are put to use doing other things such as sending and retrieving emails, taking notes, scheduling appointments, etc., the IRS documentation requirements become even harder to comply with.

This has resulted in much contention during audits and given the amounts of the deductions generally involved has been a poor use of resources on both sides of the audit table.

Recently, IRS Commissioner Doug Shulman and US Treasury Secretary “Turbotax” Timmy Geithner asked Congress to “make clear that there will be no tax consequences to employers or employees for personal use of work related devices such as cell phones provided by employers”. Further, Shulman said the IRS will not be moving forward with any of its cell phone substantiation initiatives. So, add cell phone relief to the list of things Congress is supposed to address this year, along with the other tax issues they failed to resolve in 2009.

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