From time to time we want to inform our clients not only of the latest in legal technology, but also of items that affect your use of that technology. Last week the IRS issued new guidelines regarding company usage of mobile phones that we think will be of interest to our readers.
Q: Are there new rules affecting the tax treatment of mobile phones?
A: A year ago, Congress passed the Small Business Jobs Act of 2010. Included in that act was a provision that removed mobile phones from the definition of listed property.
Q: What is listed property?
A: Listed property is property owned by an entity that requires additional recordkeeping to prove to the IRS that it is used primarily for business purposes. So if you owned a mobile phone and wanted to claim it as a business deduction, then before this year you would have been required to provide detailed recordkeeping on which calls were business-related, and which were not.
Q: So what changed?
A: On September 15, the IRS issued IRS Notice 2011-72, which clarified that part of the new law. It states that if an employer provides mobile phones to employees, it is an excludable fringe benefit. In other words, having a cell phone is recognized as a benefit to the employee. However, the employee will NOT be taxed for the value of it
Q: My employer did not give me a mobile phone. I have a personal one and my employer reimburses me or gives me a cash allowance for the business calls I make on it. What about that?
A: The September 15 notice states that reasonable reimbursement for business calls on personal mobile phones are non-taxable. That means reimbursements of unusual or excessive expenses or reimbursements given as a substitute for wages are taxable.
The members of Eastern Legal Systems always encourage our readers to check with their accountants and/or financial advisors for questions about tax treatment of their hardware and software costs. Further information about IRS Notice 2011-72 can be found at http://www.irs.gov .
Dana Riel is President and Founder of Business Solutions, Inc., serving the Washington, D.C. metropolitan area since 1985. Her firm is the authorized training center for the region for Time Matters and PCLaw by PCLaw|Time Matters, PLLC; Timeslips and Sage 50 Accounting by Sage Software; and QuickBooks by Intuit Corporation. She also serves as a consultant for Caret Legal (formerly known as Zola Suite), CosmoLex, Soluno & TimeSolv. As a trainer, Dana has provided training services to organizations such as the DOD Defense Logistics Agency, Judge Advocate General’s Office (JAG)/Department of the Navy, University of the District of Columbia School of Law, U.S. Department of Commerce and the U.S. Department of Veterans Affairs, as well as with small‐ to mid‐size law firms in the Baltimore‐Washington D.C. area. In 2009, she participated in the series of day‐long seminars sponsored by the District of Columbia Bar Association Practice Management Section, titled “Basic Training: Learn About Running a Law Office”. Ms. Riel also served as an Adjunct Professor in Georgetown University’s Paralegal Studies Program, having taught the course, “Legal Ethics/Legal Technology” in 2009; and “Legal Technology” for the Spring and Summer Semesters of 2010. She presently serves on the Advisory Board for PCLaw|Time Matters, PLLC.