Under a 1989 law, workers who use company-provided mobile phones for personal calls are supposed to count the value of those calls as income and pay federal income taxes accordingly.
But businesses and workers have long ignored the requirement, prompting IRS to ask Congress to repeal the law.
Wireless trade association CTIA supports legislation to do away with a 20-year-old law. While waiting for Congress to act, CTIA said the IRS should "consider suspending all audit activity on the taxation of the personal use of employer-provided cellphones."
"The alternatives [to legislation] proposed by the IRS are either incomplete or inadequate solutions that would continue to subject employees and employers to onerous call log requirements," CTIA President Steve Largent said. CTIA members include the country's largest wireless companies -- Verizon, AT&T, Sprint Nextel, and T-Mobile.
The IRS is collecting comments on the cellphone-tax law. In June, IRS Commissioner Doug Shulman asked Congress to repeal it, calling it "obsolete." Shulman's statement signaled a quick turnabout for the IRS, which had earlier proposed that employers assign 25% of an employee's annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax.
Without congressional action, the IRS had hoped to clarify the rule so it would be easier for businesses and workers to comply.
Sens. John Kerry and John Ensign and Reps. Sam Johnson and Earl Pomeroy have sponsored a bill with broad bipartisan support that would remove cellphones from the IRS's list of taxable properties provided to workers by their employers.
Most businesses and tax executives prefer a repeal.
U.S. colleges and universities, nonprofits and other employers are also calling for legislation to remove employer-provided cellphones from the list of taxable fringe benefits. Short of legislation repealing the cellphone requirements, the National Association of College and University Business Officers said it favors assigning a maximum number of minutes per month allowable for personal use, that wouldn't be counted for tax purposes.
The Tax Executives Institute, a trade group for company tax directors, asked IRS to suspend enforcement of its cellphone rules until Congress acts.
A California court said it loses about 45 employee hours each month -- from 160 employees that are provided cellphones by the court -- in an effort to track personal calls to comply with IRS requirements. That effort generally results in employees reimbursing the court for a total of about 125 minutes a month for personal cellphone use, wrote David H. Yamasaki, chief executive officer of the Santa Clara County Superior Court.
Of course, employees have been making personal calls with landline phones owned by their employers for scores of years without paying taxes on the value of the calls.
And they don't pay taxes on the value of personal use of business computers.
(info from The Wall Street Journal)