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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.

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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September 2011
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