Do you provide cell phones to any of your employees? There are a variety of reasons you may choose to do so, and in some situations, the value of the cell phone may be excluded from the employee’s income. Consider the following situations when evaluating employee provided cell phone tax deductions.
Noncompensatory Business Purposes
If an employer provides cell phones to its workers for business purposes, it is considered noncompensatory. Some examples of reasons an employee would be provided a noncompensatory cell phone are:
- The employer needs to reach the employee at all times for work-related emergencies.
- The employee is required to speak to clients during times they are not in the office.
- The employee may need to speak to clients that are in other time zones during times that are outside of the employee’s normal working hours.
If these situations apply, the cell phone is considered a working condition fringe benefit; meaning, these are products or services provided to an employee so they can complete their job.
Reimbursement for Using Your Personal Cell Phone
If an employee is reimbursed by their employer because they are required to use their phone for business purposes, the same guidelines apply. Additionally, it is still considered noncompensatory if the employer pays for the entirety of the cell phone bill and it is used for some personal calls as well.
If a cell phone is provided for reasons other than to allow the employee to do his or her job, the value of the phone cannot be excluded from their wages. For example, cell phones provided to increase morale, promote goodwill, or attract prospective employees are considered compensatory purposes.
If you have any questions, please contact us.