In a move that all companies should be happy about, President Obama, via a statement posted on its Website by IRS Commissioner Doug Shulman, has asked Congress to repeal a law that currently taxes personal use of corporate paid cellular phone usage. If you think that sentence is confusing, you should take a look at the statute. Nowhere does it actually define what personal usage is or how to identify it. There’s the challenge. However, if businesses that pay for their employees cellular bills don’t pay taxes on personal usage, or eliminate that subsidy for personal calls–there is liability. Now the IRS won’t come after you specifically for this, but it will be included in an audit. The crazy thing is, this isn’t new. It’s been on the books for over 10 years, but has only recently been enforced, albeit sporadically. We’ve been getting a lot of phone calls on this in the past year and have addressed it in our policy guidelines research. Even so, most businesses have taken the approach of just hoping this goes away. And maybe it will, now.
It’s not over yet. Congress, which has a chance to correct this in the past year, must now pass a law repealing it. In the end, the tax loss is minimal since it is rarely enforced, and the loss of productivity is a bigger hit than what we gain anyway. It’s your time to act. Write your Congressman and get their support. Until Congress acts, you better figure out a way to manage this or if you do get audited, you are liable.
But some questions remain. Until a new law is passed will the IRS still pursue it in an audit? What about those that got heavy fines for non-compliance, will they get their money back, will they be able to contest it in court? Does this open a new problem now? Is it wise or will Congress even look to pass a law eliminating a tax and a revenue stream during the recession, even a small one? Many questions remain and answers are still to come.