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DISCLAIMER: This blog is published for general information only - it is not intended to constitute legal advice and cannot be relied upon by any person as legal advice.  U.S. Treasury Regulations require us to notify you that any tax-related material in this blog (including links and attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.  While we welcome you to contact our authors, the submission of a comment or question does not create an attorney-client relationship between the Firm and you. 

Entries in Fringe Benefits (2)


Tax Reform: A Brief Overview of the Final Legislation

Congress passed the Tax Cuts and Jobs Act on December 20, 2017 and President Trump signed the bill into law on December 22nd. As everyone knows by now, the new law makes sweeping changes affecting most areas of income taxation. And while the final legislation contained fewer provisions affecting employee benefit plans and executive compensation than the original House Bill, employers will still be faced with a number of significant changes in law - most of which can fairly be characterized as revenue raisers - that will require careful review of their current arrangements. 

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Tax-Free Treatment of Cell Phones, Without the Burdensome Recordkeeping

It is fairly common for employers to provide employees with cell phones or to reimburse employees for the business use of their personal cell phones.  Until recently, properly receiving favorable tax treatment for such employer-provided cell phones and reimbursements required burdensome recordkeeping.  IRS Notice 2011-72 and an accompanying Field Examiner Memorandum provide welcome relief from the recordkeeping requirements, retroactive to taxable years beginning after December 31, 2009.  The Notice and Memo also provide employers with clear instructions on how to avoid taxing employees on the value of employer-provided cell phones and reimbursements. 

Past: Onerous Recordkeeping Requirements

In the bad old days cell phones were categorized as listed property, meaning that to qualify as a tax-free fringe benefit the use of the phone would have had to: (1) relate to the employer’s business; (2) entitle the employee to an income tax deduction if bought personally; and (3) be substantiated with records.  The rigid substantiation requirements obligated employees to keep a record of all business calls and even specify the business purpose of each call.  As a result, many companies established complex (and often convoluted) policies attempting to address employee cell phone use.  Clearly, the general recordkeeping requirements for listed property were not compatible with modern cell phone utilization.

Present: Recordkeeping Relief

The Small Business Jobs Act of 2010 removed cell phones from the category of listed property for taxable years beginning after December 31, 2009, but questions regarding the proper tax treatment of employer-provided cell phones and cell phone reimbursements remained.  On September 14, 2011, the IRS issued Notice 2011-72 and a corresponding Field Examiner Memorandum, which together clear up any remaining ambiguities.

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