Have a Tax Question? Ask a Tax Expert
You can only pay the portion of their cell phone bills that actually pertain to business calls. If you pay for their entire cell phone bill and even a small portion of the cell phone was used for personal use, then you would have to include that amount as compensation on their W-2 form, as it is considered to be a taxable fringe benefit.
Most cell phone providers provide or can provide a detailed billing statement. You would need to have your employees turn in a copy of their detailed statement and have them clearly mark which calls were for business and which calls were for personal reasons. You could then just pay them for the actual percentage of their business use, and thereby avoid having to add any amount as compensation to their earnings statement.
I am giving you a link below to the IRS Taxable Fringe Benefit Guide. Please refer to page 59 which address the issue of cell phones.
If this has been helfpful, please press the Accept button. Positive feedback is also appreciated.
Hello again Terri,
Certainly you can give them a raise of any amount you like, however, the raise would of course need to be included in their taxable wages.
You are correct, it does get difficult to separate business and personal emails, and in such a case the employee would actually have to keep a log himself of each and every call and/or email which could be quite cumbersome.
These rules were first put in place by the IRS back in the 90's when cell phone calls were a lot more expensive than they are now, so there are currently some talks about changing these antiquated rules. But for now that's what you have to stick with.
If this was helpful please press the Accept button. Positive feedback is also appreciated.