Do you pay for personal calls on your work cell?

The Internal Revenue Service is proposing ways to make it easier for businesses to make personal calls on work phones taxable benefit income.

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By Catherine Clifford, staff writer

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NEW YORK ( -- You are tethered to the office 24/7 through your CrackBerry, and as a result probably make a few (dozen?) personal calls from that phone. To the wife? The babysitter? Dinner reservations, perhaps?

Odds are, you don't pay income tax on that "perk" even though the IRS requires companies to treat personal use of a work cell phone as benefit income that can be taxed.

But for the two decades the rule has been in place, it has been largely ignored. Nobody - businesses nor individuals - want to go through pages of cell bills to calculate exactly what portion of your bill is personal and taxable.

"Trying to track any personal calls versus business calls is a headache to document," said Gordon Bernhardt, president of Bernhardt Wealth Management. That would certainly be "cumbersome paperwork" for businesses.

"In the current environment, the rule as it operates now is pretty difficult to comply with," agreed an IRS official.

Jeff Ready, CEO of Indianapolis-based Scale Computing, remembers tracking minutes and what it headache it was. But he no longer worries about work vs. personal calls. "In the past, there were not unlimited plans and you had to track overage," he said. "But now, everyone is on a standard plan with unlimited voice and data, so it doesn't matter."

Even though he and others see this rule as an "outdated concept," the IRS said it has been approached by some businesses wanting it clarified to make it easier to have employees pick up the tab for their personal calls.

As such, this week the agency proposed three new plans it says might make the process less burdensome. It is seeking public comment on the options until Sept. 4. Here are the three proposals currently on the table:

Minimal Personal Use Method: Under this plan, the Treasury would allow the entire expense of the business cell phone to be excluded from your personal income tax, so long as you can provide sufficient documentation that you are using a personal phone for personal calls during work hours

Another option under this plan suggested by the IRS would define certain allowable number of minutes or situations when it would be considered acceptable to use a work phone for personal uses.

Safe harbor Substantiation Method: The second proposal from the IRS would consider that 25% of employer sponsored plans are considered personal.

Statistical Sampling Method: In the third proposal, businesses would use approved statistical sampling methods to average how much time employees spend using business phones for personal purposes. The company would use the average as a multiplier to determine how many minutes the employee would be responsible for covering.

No matter what - if any - changes the IRS makes, Ready says he has no plans to charge his employees for any personal minutes. For him, it would be like determining how much to charge an employee for making a local call from a land line at their desk. "It just seems silly if you put it in the context of a land line."

"When I give you a cell phone, I expect you to carry it," he added. "To get you to carry it, I expect that you are going to give the number to your spouse. To me, that is no big deal." To top of page

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