Good news from the IRS regarding cell phones

IRS Notice 2011-72 tells us that when an employer provides employees with cell phones for business reasons, neither the business nor personal use of the phone results in income to the employee. And here’s the best news of all: No recordkeeping of the usage is required. And, if instead of providing the cell phone the employer reimburses the employee for providing a cell phone for business use, that reimbursement will not be taxable. The guidance applies for all tax years after Dec. 31,2009.

The employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer's business, and the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurs. Additionally, the reimbursement for business use of the employee's personal cell phone cannot be a substitute for a portion of the employee's regular wages.