The Tax Man Cometh…

…after your company cell phone.

The use of company-issued mobile phones could trigger new federal income taxes on millions of Americans as a “fringe benefit.”

The Internal Revenue Service proposed employers assign 25% of an employee’s annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax.

Apparently, personal use of company cell phones is currently supposed to be reported as “income” and subject to tax. The IRS contends that this is widely ignored.

Under a 1989 law, workers who use company-provided mobile phones for personal calls are supposed to count the value of those calls as income and pay federal income taxes accordingly.

But businesses and workers have long ignored the requirement, prompting the IRS to consider steps the agency said would make it easier for businesses and workers to comply.

Some firms said they have ignored the tax because of the paperwork required to account for personal and work calls. U.S. companies allow incidental personal use for about 40% of employees with cellphones, according to a survey by In-Stat, a market research firm.

So…because 40 percent of employees are allowed to use their company cell phones for personal use, 100% of people with company cell phones should be taxed?

Sounds like your typical bureaucrat’s solution to a “problem” to me.

Honestly, I had no idea about the tax rules, I just assumed that my company’s “no personal use” policy was because they didn’t want to pay for the minutes of personal calls. Other than on the rare occasion when my personal phone isn’t working, or I’ve forgotten it at home, I’ve never used my company phone for personal calls…and I’ve used my personal phone for company business at about an identical rate for identical reasons…so it’s a wash.

I don’t work out of an office so I don’t have a company office phone. My Cell phone IS my company phone. So what’s the difference between my company cell phone and the one that the guy who works in the Pembroke Office has on his desk? You gonna tell me the office phones never get used for personal calls? BS.

Basically, what the IRS is saying here is that it is too difficult for them to enforce their own onerous and ridiculously complex rules on the minority of companies that don’t follow them…so we’ll just make a blanket rule that punishes everyone…oh…and increase our revenues at the same time.

But what will be the unintended consequence of this new tax?

I can only speak to my situation, but I’d bet I’m not the only one this applies to among the 60% of business cell phone users who currently do NOT use them for personal calls:

Right now, I have a company phone that is strictly for company use. If the IRS starts taxing me on 25% of that phone as income, the company can no longer claim that it is only for company use. That means, it’s OK for me to use my company phone for personal use, right? Therefore, I have no need for my personal phone. I’ll get rid of it and only carry around one phone from now on.

That would actually work out much in my favor because my personal phone costs me MUCH more than the tax on 25% of the value of the company phone plan.

Now, if even a percentage of the tens of millions of business cell phone users take the same action…if millions of cell phone users suddenly drop their service…what will that do to the cell phone industry and the employees of that industry?

It’s almost beginning to seem to me that this administration is intentionally trying to destroy industries so that they can “bail them out” and then take them over.

Hat tip to my best friend CB via e-mail.

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