IRS Bloodsuckers Want Cell Phones to Be a Taxable Fringe Benefit

With about 100,000 employees (more than the CIA and FBI combined), the IRS has plenty of people who daydream about new ways of taking money from taxpayers. The latest scheme to emanate from the tax bureaucracy is to classify employer-provided cell phones as a taxable fringe benefit. The Wall Street Journal reports (subscription required):

The use of company-issued mobile phones could trigger new federal income taxes on millions of Americans as a “fringe benefit.” The Internal Revenue Service proposed 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. …The IRS move, which is spurring efforts by the wireless industry and others to kill the idea, would mark a stricter enforcement of an existing rule that classifies employer-provided cellphones as a taxable benefit, rather than a 24-hour-a-day work tool. 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 the IRS to consider steps the agency said would make it easier for businesses and workers to comply. …”The idea that you should keep a log saying, ‘I made a call saying I will be late for dinner again,’ that’s a totally cumbersome and burdensome requirement that most employers and employees are not going to comply with,” said Jot Carpenter, vice president of government affairs for CTIA-The Wireless Association, a trade group of cellphone-equipment manufacturers and service providers. “It would be a nightmare for corporations to try to figure out what are work calls and what are personal calls,” said Gerry Coady, chief information officer at Frontier Airlines Holdings Inc., who manages about 100 BlackBerrys for workers at the Denver-based airline. Some employees aren’t so happy about the idea, either. “Your job gives you a phone to be in 24-hour contact. It’s only natural that you’re going to use it personally,” said Anthony Cecchini, an analyst at investment bank Oppenheimer & Co. “If I need to get a personal email or call, it shouldn’t be a big deal.” …Wireless companies also argue the IRS rule is outdated. Rates have declined so dramatically in the past decade — with night and weekend calls free under many plans — that it makes little sense for the IRS to assess employee benefits by nickels and dimes. “This is a regulation from a bygone time, dating back to the infancy of the cellphone business, and it is in desperate need of updating,” said Howard Woolley, a senior vice president with Verizon Wireless, a venture of Verizon Communications Inc. and Vodafone Group PLC.

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