We receive a lot of inquiries from Church Treasurers about how to properly report and reimburse the minister’s personal cell phone.
Under current law, employees receive a fringe benefit when they receive a cell phone from an employer and the employer acquires and pays the costs of using the cell phone.
To the extent that the employee uses the employer’s cell phone for business purposes, the fair market value of such usage qualifies as a working condition fringe benefit that is excludable from the employee’s gross income. However, to the extent the employee uses the employer’s cell phone for personal purposes, the fair market value of such usage is includable in the employee’s gross income.
[Shulman comments on the Jan. 8, 2010 C-SPAN Newsmakers program] The IRS Commissioner and Treasury Secretary recently urged strong recommendations to Congress that there be no tax consequences to employers or employees for personal use of cell phones:
A report from the IRS Commissioner Douglas Shulman, claims he is optimistic that Congress will enact legislation this year to make it clear that personal use of employer-provided cell phones will not be subject to taxation.
In June 2009, the IRS proposed simplification of the cell phone substantiation requirements. Shortly thereafter, Shulman and Treasury Secretary Timothy Geithner urged Congress “to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers. The passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete.”
Shulman now says that the IRS will not be moving forward with any of its cell phone initiatives.
Cell phones may be considered unreimbursed business expenses, but are not included in housing allowance deductions. The best option is to include your cell phone usage in your Accountable Plan. If you don’t have one, you probably should. See Steve’s Blog article called, The Three Biggest Tax Savings for Minister, cont.”