Obama wants to repeal tax on company cell phones
Ever make a personal call on your company cell phone? Did you record the value of that call as taxable income, as required by law?
Join the club, but don't worry. President Barack Obama will propose repealing the widely ignored requirement as part of his 2011 budget plan, a Treasury Department official said Saturday, AP reported.
The administration made a similar proposal in June, and it was well received in Congress. Lawmakers, however, became preoccupied by the health care debate for much of the year and a lot of their work on tax law was delayed.
Obama is scheduled to release his proposed tax and spending plan on Monday. If the cell phone tax is repealed this year, taxpayers would be off the hook for all of 2010, said the official, who spoke on condition of anonymity because the budget had not yet been released.
A 1989 law says that personal use of a company cell phone should be taxed like other fringe benefits, such as a company car. The law, however, was passed when cell phones were referred to as car phones and were considered a luxury. Today, workers increasingly use company-issued mobile devices for texting, e-mailing and browsing the Internet - sometimes for work, sometimes for personal use.
Last summer, the Internal Revenue Service issued a request for comments on ways to improve compliance with the tax, and there was such a backlash that the administration proposed repealing it.
At the time, IRS Commissioner Doug Shulman said the tax was "poorly understood by taxpayers" and acknowledged it was difficult to enforce consistently.
Some employers have faced big tax bills after failing to comply with the law.
In 2008, the IRS audited two University of California branches, in Los Angeles and San Diego. As part of a settlement, UCLA paid a tax assessment of $238,474 and San Diego paid $186,471.