IRS Retreats on Employer-Provided Cell Phones

Cole Schotz
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This post should provide fodder for all the tax reformers out there who want to simplify the tax code. Employers, employees take note: the IRS has simplified the recordkeeping requirements for employer-provided cell phones! Uh, sort of.

Let us explain: the Internal Revenue Code defines gross income as all income from whatever source derived. Gross income of course includes things like compensation for services, but it also includes fringe benefits received by employees from their employers, such as car services, nonqualified moving expenses, etc.

There are exceptions to the fringe benefit rule. For example, Code §132(a)(3) provides that gross income does not include any fringe benefit which qualifies as a “working condition fringe,” that is, a work-related benefit that would be deductible if the employee had to pay for it. Code §132(a)(4) provides that gross income does not include any fringe benefit which qualifies as a “de minimis fringe,” that is, property or a service so small as to make accounting for it unreasonable or administratively impracticable. There are substantiation requirements for these fringe benefits. In addition, there are “heightened substantiation rules” for property specifically listed by Congress because it is subject to “abuse.”

Please see full publication below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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