The IRS has issued guidance on the treatment of employer-provided cell phones, as well as on the treatment of employer reimbursement to an employee for the cost of maintaining a personal cell phone that is used for business purposes (Notice 2011-72 ).
This notice provides that, when an employer provides an employee with a cell phone primarily for noncompensatory business reasons (i.e. it is necessary for the employee to have one to do his or her job effectively) , the IRS will treat the employee’s use of the cell phone for reasons related to the employer’s trade or business as a working condition fringe benefit, the value of which is excludable from the employee’s income. In addition, the IRS will treat the value of any personal use of a cell phone provided by the employer primarily for noncompensatory business purposes as excludable from the employee’s income as a de minimis fringe benefit. The rules of this notice apply to any use of an employer-provided cell phone occurring after December 31, 2009. The application of the working condition and de minimis fringe benefit exclusions under this notice apply solely to employer-provided cell phones and should not be interpreted as applying to other fringe benefits.