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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 10112
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Currently we pay and provide business cell phones to

Customer Question

Currently we pay and provide business cell phones to management employees; however, lately employees are using there own personal phones because they dislike carrying 2 phones around. If we opt to get rid of business cell phones can we provided an allowance or stipend for employees that use there own phones. If so would that be taxed? or any advice on how to take care of this issue
Submitted: 10 months ago.
Category: Finance
Expert:  Lane replied 10 months ago.

I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from mercer University’s Stetson School of Business and Economics, as well as CFP® and CRPS designations

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Hi - I can help here

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Yes, the BEST way to do this is through what IRS calls an "accountable plan"

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You can reimburse the employee (business deduction for the company) for the business use of the phone, IF they account for the time using an expense report showing/documenting business use of the phone.

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This makes the benefit tax free to them.

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In order to be classified as an Accountable Plan, Internal Revenue Service (IRS) publication 463 states that the arrangement must include all of the following:

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  • The employee expenses must have a business connection.
  • The employee must adequately account for the expenses within a reasonable time period.
  • The employee must return excess allowance within a reasonable period of time.

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Expert:  Lane replied 10 months ago.

From an excellent article on this here:https://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2010/CorpTax/EmployeeBusinessExpenses.jsp

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In order to avoid W-2 inclusion, the employee must generally either account for all monies advanced by the employer in a timely manner or return any funds in excess of documented expenditures within 120 days of the original receipt of funds.

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If the employee does not follow the rules above, the expenses are treated as having been reimbursed under a “Non-accountable Plan.” Under a Non-accountable Plan, all advances/allowances and reimbursed expenses are combined with the recipient’s wages, salary and other pay and reported on the employee’s W-2.

Expert:  Lane replied 10 months ago.

And here's the IRS guidance on this: https://www.irs.gov/publications/p463/ch06.html#en_US_2014_publink100034110

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Hope this has helped...Let me know if you have questions.

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If this HAS helped, (and you don’t have additional questions on this), I'd really appreciate your positive rating … (by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Thank you,

Lane

Expert:  Lane replied 10 months ago.

Hi,

I’m just checking back in to see how things are going.

Did my answer help?

Let me know…

Thanks

Lane