Clarifying a somewhat confusing issue, the IRS recently issued guidance on the taxation of employer-provided cell phones. The guidance applies to cell phones provided for “noncompensatory” purposes–that is, the cell phone is not just an added perk to attract or retain employees. The provision of an employer-provided cell phone must, in other words, be business related.
The good news, though, is the IRS will not include the value of the cell phone as taxable income to the employee. This includes the employee’s use of the cell phone for personal reasons, as long as the overall purpose of the employer’s provision of the cell phone is noncompensatory.