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IRS Issues Guidance on Taxing Employer-Issued Cell phones

In IRS Notice 2011-72, the IRS provides that?áwhen an?áemployer provides an employee with a cell phone primarily for?ábusiness purposes (e.g., to be able to speak with clients when away from the office)?áand not as compensation,?áthe cell phone will be treated as a non-taxable fringe benefit.?á The IRS will treat the employee?ÇÖs?áwork-related use of the cell phone as a working condition fringe benefit that automatically satisfies the substantiation requirements?áof Code Section?á132(d), and the?áemployee’s personal use of the cell phone?áto be?áa non-taxable de minimis fringe benefit. ?áIn a related internal memorandum, the IRS advises its field agents that where an employer reimburses employees for the business use of their personal cell phones, the principles of Notice 2011-72 should also be applied. These rules apply to cell phones provided by the employer and reimbursements made after December 31, 2009.

September 2011
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