The IRS issued guidance on the treatment of employer-provided cell phones as an excludible fringe benefit. Generally, when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is nontaxable to the employee. The IRS also announced in a memorandum to examiners a similar administrative approach that applies with respect to arrangements common to small businesses that provide cash allowances and reimbursements for work-related use of personally-owned cell phones.
The change in treatment is intended to simplify recordkeeping requirements for employers and employees. The IRS also recognized that cell phones, once rare for business use, have become commonplace, indeed necessary, in everyday business and personal use.
The Small Business Jobs Act of 2010 removed cell phones and similar telecommunications equipment from the “listed property” designation for tax years beginning after December 31, 2009.