Bill would relieve cell phone
record-keeping burden

A proposed federal Cell Phone Act would mean that personal use of employee paid cell phones and cell phone service would no longer be subject to onerous record-keeping requirements under the listed property rules, according to Grant Thornton’s nonprofit tax alert newsletter. This could eliminate the risks of intermediate sanctions associated with this common employee benefit.

Currently, cell phones, Blackberrys, Treos, etc., are considered listed property. Employees are required to log business use versus personal use to properly exclude the value of the use of the item from the employee's gross income. Otherwise, the entire benefit is includable as wage income.

For nonprofits, if the value of the personal use of cell phones not properly documented as compensation, intermediate sanctions may apply. Using employer equipment can result in wage income, which, if unreported on Form W-2 or other tax form, can be considered an excess benefit by the IRS and subject to intermediate sanctions, which is a serious risk for a seemingly minor fringe benefit.

If enacted, the legislation would mitigate the current awkward and difficult-to-enforce rules surrounding employer-provided cell phones and employers may be able to use reasonable estimates to manage these compensation issues.

For additional information, contact Grant Thornton’s  Greg Goller, partner in charge of Grant Thornton's national not-for-profit tax practice, (703) 637-2680; Nancy Murphy, tax principal, (703) 637-2699; or Garrett Gluth, senior associate, (703) 847-7623.