IRS Considers Simplified Cell Phone Reporting

WASHINGTON - The Internal Revenue Service (IRS) has issued Notice 2009-46 in an effort to simplify procedures for substantiating employee cell phone use when cell phones are provided by the employer. The comment period ended Sept. 4 and final rulings are still being considered.

Under current requirements, the employee should keep a record of each call and the time it is incurred, as well as its business purpose. If calls are itemized on a monthly statement, they should be identifiable as personal or business, and the employee should retain any supporting evidence of the business calls.

Because of the volume of calls that an employee may make, as well as the variety of telephone service provider pricing systems, the recordkeeping requirement may be burdensome to employees as well as employers. In order to simplify reporting requirements, and eliminate the need for detailed records on each call, Notice 2009-46 presents three proposals for simplifying the reporting burden - minimal personal use method; safe harbor substantiation method; and the statistical sampling method.

With the minimal personal use method, the IRS and Treasury Department are considering two proposals that would allow an employer to deem all of an employee’s usage of an employer-provided cell phone as business usage.

Under the first proposal, the entire amount of an employee’s use of an employer-provided cell phone would be deemed to be for business purposes if the employee can account to his or her employer with sufficient records to establish that the employee maintains and uses a personal (non-employer-provided) cell phone for personal purposes during the employee’s work hours.

Alternatively, the second proposal would define a specified amount or type of “minimal” personal use that would be disregarded in determining the amount of personal use of an employer-provided cell phone. For example, “minimal” could be defined by reference to a particular number of minutes of use or for certain personal purposes.

With the safe harbor substantiation method an employer would treat a certain percentage of each employee’s use of an employer-provided cell phone as business usage. The remaining percentage of use would be deemed to be for personal purposes. For this proposal, the IRS and Treasury Department propose a business use percentage of 75 percent.

The statistical sampling method would allow employers to use statistical sampling techniques to measure an employee’s personal use of an employer-provided cell phone.

For more information, go to and search “cell phone proposals”.

Publication date: 09/07/2009

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