On November 3, in a monthly call with payroll industry representatives, an IRS official announced that further guidance will be forthcoming on employer-issued cell phones.  Section 2043 of the Small Business Jobs Act removed cell phones from the definition of listed property for taxable years, starting January 1, 2010.  However, the requirement to substantiate business use of the devices remained.  On September 14, 2011, the IRS issued a press release and a Notice (2011-72) stating that the value of an employee’s use of a cell phone when related to the employer’s business is to be excluded from the employee’s income.  Under the notice, employers which require employees to use personal cell phones for business purposes may treat reimbursements of expenses to the employee for “reasonable cell phone coverage” as nontaxable.  The IRS also concluded that recordkeeping of business use in order to receive the tax-free treatment was not needed.  Since that time, questions have arisen about whether employers may give employees a flat cell phone allowance and treat the allowance as nontaxable.  The IRS has agreed that flat cell phone allowances need to be explained further, and it is likely that a new IRS guidance will be issued before the end of 2011.  Stay tuned.

                                                                                                                    By Bill Harding, Chapter Attorney