The IRS has made a pronouncement to clarify the tax treatment of employer-provided cell phones.
Cell phones have been officially removed from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.
We now can treat employer- provided cell phones as an excludible fringe benefit. Of course only when the employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not even require recordkeeping of business use in order to receive this tax-free treatment.
Under the guidance issued today, where employers provide cell phones to their employees or where employers reimburse employees for business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements. The guidance does not apply to the provision of cell phones or reimbursement for cell-phone use that is not primarily business related, as such arrangements are generally taxable.