Posts Tagged ‘Tax Policy’

Dial Another Tax

Tuesday, June 16th, 2009
Dial Another Tax

Dial Another Tax

According to the Wall Street Journal, the Internal Revenue service issued a notice this week to advise of stricter enforcement of taxation on employer-provided fringe benefits, specifically, mobile telephones. Pursuant to a 1989 law, employees who use company-paid mobile phones for personal calls are required to impute the cost of those calls as income on which they must pay federal tax. But, as is the case with frequent flyer miles earned on business travel, employees rarely do so. Now with budget deficits stretching out for generations, the federal government is desperate for tax revenues. The IRS proposes that employers assign 25% of an employee’s annual telephone expense as a taxable benefit. Employees could avoid that tax liability if they could demonstrate that they use personal mobile phones for personal calls made during work hours. Alternatively, employers could use a statistical sampling to calculate the proportion of employees’ cell phone use that is personal and assess the tax accordingly.  This tax will likely cost more in compliance than it will yield in revenues. As a recognition of the compliance costs, large corporations are already debating the idea of canceling employer-paid mobile phones and requiring employees to pay for their own phones and submit invoices to the company for reimbursement of work-related calls. What a great idea – shift more of the cost of employment and cash flow strain on workers whose taxes are increasing and who cannot keep up with inflation! I don’t like that one, particularly since mobile phones are critical to disaster preparedness and recovery. I want to maintain some quality control over how those phones are selected and maintained. Let’s hope that the wireless companies are successful in their lobbying efforts to kill this proposal.