Policies for Business Cellular Phones. Leslie Youngberg: LYoungberg1@weber.edu Barbara LeDuc: BLeDuc@weber.edu Allison Knowlton: AllisonKnowlton@weber.edu. Introduction. Who? What? Why?. Weber State University. Outline. IRS Ruling Forming a Policy Pros and Cons Process Stipends
Leslie Youngberg: LYoungberg1@weber.edu
Barbara LeDuc: BLeDuc@weber.edu
Allison Knowlton: AllisonKnowlton@weber.edu
Weber State University
The IRS is stepping up its enforcement activities. There is evidence the IRS is aggressively auditing the fringe benefits area.
A brief discussion of cellular phones can be found under the “Employee Use of Listed Property” heading on page 6 of the “Internal Revenue Services Fringe Benefits Audit Techniques Guide” found on your CD.
Internal Revenue Service Fringe Benefits Audit Techniques Guide:
If the IRS were to come and audit University Departments offering cellular phones to employees and they find personnel are not reimbursing the department/university for personal calls, both incoming and outgoing, whether they have unlimited plans or not, the IRS can assess huge fines. Cellular phones are cited as fringe benefits.
IRS requires that the business and personal use of University owned cell phones must be documented in a very detailed manner. The IRS can declare that all undocumented use is personal and should be taxed, even if the calls were mostly business calls. Receiving a taxable reimbursement for an individually owned cell phone removes this detailed documentation requirement.
Unless otherwise provided by law, the value of a fringe benefit provided to an employee is included in that employee’s gross income. An exclusion is a “working condition fringe benefit”. That is any property or services provided to an employee of the employer to the extent that, if the employee paid for such property or services, such payment would be allowable as a deduction on their income taxes.
To the extent the value of a fringe benefit is included in gross income of an employee for income tax purposes, the value of the fringe benefit is also included in wages subject to FICA and FUTA taxes. The IRC law also states. To the extent the value of the fringe benefit is excluded in the gross income of an employee for income tax purposes, the value of the fringe benefit is also excluded from wages subject to FICA and FUTA taxes.
Rigorous substantiation requirements are imposed. Substantiation requires employees to provide the business purpose of each expense, generally in writing.
Business use is excludable from wages of the employee as a working fringe benefit. Personal use is included in the wages of the employee. If substantiation requirements are not met, all use is included in the wages of the employee.
Supplemental pay is given to an employee on his/her paycheck to pay for business calls. This accommodates the IRS rules and regulations and alleviates documenting calls.
Just in Time…
Determining appropriate stipend amounts
Additional questions may be sent to:
Leslie Youngberg – LYoungberg1@weber.edu
Barbara Leduc – BLeduc@weber.edu
Allison Knowlton – AllisonKnowlton@weber.edu