Do you know what's trackable?
When an employer provides an employee with a cell phone primarily
for noncompensatory business reasons, the business and personal use of the cell
phone are generally nontaxable to the employee as an excludable fringe benefit.
Excludable fringe benefits are not included in wages. If the cost of an item is
deductible by an employee as a business expense, it may be excludable from the
employee’s wages as a working condition fringe benefit if provided by the
employer. The IRS will not require record keeping of the phone’s business use
from individuals who receive this tax free treatment.
When a business provides the employee with a cash
allowance or reimbursement to pay for a personal cell phone used for business
purposes, the amount is also considered an excludable fringe benefit and
nontaxable. However, the employee must maintain the type of cell phone coverage
that is reasonably related to the needs of the employer’s business. Plus, the
reimbursement must be reasonably calculated so as not to exceed expenses the
employee actually incurred in maintaining the cell phone. Additionally, the reimbursement
for business use of the employee’s personal cell phone must not be a substitute
for a portion of the employee’s regular wages.
Have questions? Call us at Tax Pro Plus LA today: 310-827-4829
