Cell-Phone Reimbursements
A similar rule applies when an employer reimburses an employee for cell phone expenses. If an employer requires employees to use their personal cell phones for busi- ness purposes, reimbursements of employ- ees’ expenses are not taxable. However, the employer can only reimburse the employee for reasonable expenses, not for excessive or unnecessary cell phone expenses.
Examples of Business Reasons for Phone
Here are some examples demonstrating acceptable business reasons for reimbursing an employee for a cell phone:
The employer’s need to contact the employee at all times for work-related emergencies.
The employer’s requirement that the employee be available to speak with clients at times when the employee is away from the office or outside of the employee’s normal work schedule (such as when clients are in different time zones).
The employee must communicate with clients outside of business hours
and the employee’s basic coverage plan charges a flat-rate per month for a certain number of minutes domestic calls. The employer can reimburse the employee for the monthly basic plan expense.
New IRS rules greatly ease the burden on employers who provide their employ- ees with cell phones by lifting the detailed recordkeeping requirements. Now, if an employer provides an employee with a cell phone primarily for business reasons, the business and personal use of the cell phone is tax-free to the employee. For this rule to apply, there must be substantial business reasons, other than forcompensation, morale or goodwill, for
giving the employee a cell phone. This tax treatment is retroactive to the beginning of 2010.
Cell-Phone Reimbursements
A similar rule applies when an employer reimburses an employee for cell phone expenses. If an employer requires employees to use their personal cell
phones for business purposes, reimbursements of employees’ expenses are not taxable. However, the employer can only reimburse the employee for
reasonable expenses, not for excessive or unnecessary cell phone expenses.
Examples of Business Reasons for Phone
Here are some examples demonstrating acceptable business reasons for reimbursing an employee for a cell phone:
The employer’s need to contact the employee at all times for work-related emergencies.
The employer’s requirement that the employee be available to speak with clients at times when the employee is away from the office or outside of the employee’s normal work schedule (such as when clients are in different time zones).
The employee must communicate with clients outside of business hours
and the employee’s basic coverage plan charges a flat-rate per month for a certain number of minute for domestic calls. The employer can reimburse the employee for the monthly basic plan expense.
Examples of Excess Taxable Reimbursements
The IRS gives the following examples of reimbursement arrangements
that may exceed the employer’s needs and, therefore, should be examined:
Reimbursement for international or satellite cell phone coverage to service tech niacin whose business clients and other business contacts are all in the local geographic area where the technician works
• A pattern of reimbursements that deviates significantly from a normal course of
cell phone use in the employer’s business. For example, if an employee received reimbursements for cell phone use of $100/quarter in quarters 1 through 3, but receives a reimbursement of $500 in 4th quarter.
