IRS Issues Guidance on Tax Treatment of Cell Phones

Submitted by Brian Snure, Snure Law Office, PSC

On September 14, 2011, the IRS issued Notice 2011-72 which establishes that when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require record keeping of business use in order to receive this tax-free treatment. In addition, in a related IRS memorandum, the IRS is taking the position that if an employer provides a cash allowance or reimbursement for work-related use of personally owned cell phones such reimbursements will not be considered taxable provided that the reimbursements are not excessive or made as a substitute for wages.

The following are links related to this matter:

IRS announcement:
http://www.irs.gov/newsroom/article/0,,id=245741,00.html

IRS Notice:
http://www.irs.gov/pub/irs-drop/n-11-72.pdf

IRS Memorandum:
http://www.irs.gov/pub/foia/ig/sbse/sbse-04-0911-083.pdf 

You may reach Brian Snure at Brian@snurelaw.com, or by calling 206.824.5630, toll-free 800.486.9484.

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