IRS Guidance Provides Employer-Provided Cell Phones May Generally be Treated as Nontaxable Fringe

By on September 16, 2011

by Ralph DeJong, Ira Mirsky and Michael Fine

On Wednesday, September 14, 2011, the IRS issued Notice 2011-72, which provides long-awaited relief concerning the tax treatment for the employee use of employer-provided cellular telephones or other similar telecommunications equipment (e.g., PDAs and Blackberries):

  1. The IRS will generally treat an employee’s business use of an employer-provided cell phone as a nontaxable working condition fringe benefit, without the need to meet onerous substantiation requirements.
  2. The IRS will generally treat the value of any personal use of an employer-provided cell phone as a nontaxable de minimis fringe benefit.

The IRS guidance specifies that the business and personal use of an employer-provided cell phone provided by the employer will generally be treated as nontaxable to the employee, if the employer has provided the cell phone primarily for noncompensatory business reasons.  Because it applies for taxable years beginning after December 31, 2009, the tax relief provided under the IRS Notice takes effect immediately.

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