IRS Taxing Employer Provided BlackBerry or Cell Phone

Does your employer provide you a BlackBerry or cell phone or pay for your wireless service? Do you use that device for personal purpose too? The IRS is considering three ways to tax you for that.

Certain employee benefits, like health care, are not taxable. Personal use of an employer provided BlackBerry or cell phone is not one of them. The IRS published Notice 2009-46 on June 8. It’s on pages 13-15 in Internal Revenue Bulletin 2009-23. They are asking for public comments about the three methods it’s considering.

1. Minimal Personal Use Method. There are two proposals under this method. Under the first proposal, if the employee can show to the employer that he/she carries another personal cell phone and uses that phone for personal matters, then the employee won’t have to pay taxes on the company provided  BlackBerry or cell phone. Under the second proposal, there would be a threshold of say X minutes. If the employee can show he/she used the BlackBerry or cell phone for personal purpose for no more than X minutes or he/she used it only for certain exempted types of calls (emergency for example), the employee won’t have to pay taxes for such personal use.

2. Safe Harbor Substantiation Method. Under this method, instead of getting proof from the employees or tracking how many minutes were used for personal purpose, the employer just uses an IRS-specified percentage for everybody, say 75% for business use and 25% for personal use. Employees will pay taxes on 25% of the fair market value of the service.

3. Statistical Sampling Method. Under this third method, the employer is supposed to take a sample and do some statistical analysis to figure out the percentage of personal use versus business use. Then the employer applies that percentage for everybody and adds the proportional value of the service to employees’ pay, on which the employees will pay taxes.

For more information, in case I misinterpreted something, please read Notice 2009-46 on Internal Revenue Bulletin 2009-23. If you have something to say to the IRS about these proposals, send your comments to them by mail or by e-mail. The addresses are on the last page in the notice. Be sure to include Notice 2009-46 in the subject of your comments.

What about company provided laptops or on-site fitness gym? I also wonder when the IRS will make employees account for soft drinks and snacks and team lunches.

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