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IRS Mulls Cell Phone Tax Revisions

The government may simplify an old law to reflect the ubiquitous nature of cell phones and the plummeting cost of mobile phone calls.

W. David Gardner

June 12, 2009

2 Min Read

The inexorable drop in mobile phone calling prices has the U.S. Internal Revenue Service calling for a revision of an old law that required business cell phone users to include the value of their personal calls in their gross income.

Under the existing law, the IRS asks that cell phone users include in their gross income the value of personal calls for which they have been reimbursed by employers who foot their cell phone bills.

The IRS has suggested simplifying the old law, which has become cumbersome with the passage of time as call prices have plunged. “The rationale behind this policy perhaps made sense in the 1980s,” a Sprint Nextel spokesman said. “But it doesn’t reflect how people live their lives and the ubiquitous nature of cell phones.”

The IRS action followed legislation proposed by U.S. Reps. Sam Johnson, R-Texas, and Earl Pomeroy, D-N.D., and Sens. John Ensign, R-Nev., and John Kerry, D-Mass., urging that the old law be repealed. Today few companies enforce the complicated task of separating business and personal calls of their employees. When the law was passed several years ago, mobile phone calls were expensive and less numerous so it made sense to account for business and personal calls separately.

In addition to the lawmakers opposing the old law, a group of trade associations recently told the U.S. Congress that the record-keeping requirement is too cumbersome to be worthwhile for all companies, big and small.

One likely way for consumers to avoid the additional tax would be to carry an extra phone for personal use -- something many business phone users already do. A crackdown on the 1989 law could result in more business phone users purchasing separate phones for personal use. On the other hand, complex legislation could create a nuisance for handset suppliers such as Research In Motion’s business-oriented sales.

The changes are in the proposal stage, and the IRS is seeking comments on the issue by Sept. 4.


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