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									SUBJECT: Cell Phone Policy & Procedures

EFFECTIVE DATE: June 23, 2008

PURPOSE:

A new cell phone policy is being initiated in order for the agency to comply with Internal
Revenue Service (“IRS”) rules regarding the taxability of employee cell phones and devices.
Under IRS Code Section 274(d), the IRS considers cell phones to be “listed property” and as
such requires detailed record keeping including (a) the amount of the expense; (b) the time and
place of each call; and (c) the business purpose for each call and to whom it was made. The
IRS can declare that all undocumented use is personal and should be taxed as wages, even if
the cell phone or device were mostly used for business purposes.

The degree of effort required for employees and the agency to comply with these regulations is
onerous; therefore, we are converting to a program where each eligible employee will receive a
taxable allowance for an individually owned cell phone or device. This change eliminates the
detailed IRS documentation requirement.

POLICY STATEMENT:

Effective June 23, 2008, all employees currently using an agency-owned cell phone must
comply with this policy.

The Internal Revenue Service considers cell phones to be “Listed Property” and treats employer
provided cell phones and monthly charges paid by the employer to be taxable income to the
employee unless the employee can show that the cell phone was used for business purposes
pursuant to IRS Section 274(d)(4). This requires the employee to maintain detailed records
regarding each cell phone call, including the amount of the expense, the time and place of each
call, and the business purpose for each call.

The IRS can declare that all undocumented use of a cell phone is personal and treat the
monthly cell phone charges as wages even if the calls were for business purposes.
Consequently, the agency will no longer purchase cell phones for use by individual employees.
Employees whose job duties may require the need to use a cell phone may receive extra
compensation in the form of a cell phone allowance as reimbursement for business-related
costs of utilizing their personal cell phones and paying monthly fees. All other employees may
submit infrequent business-related cell phone expenses for incidental reimbursement; however,
reimbursement will only be provided when such use causes the employee to exceed their
authorized plan minutes.

To allow for a transition to personal ownership of cell phones, all agency-owned cell phones
must be turned in to the IT Department by June 20, 2008. The only exceptions to this policy will
be cell phones which are maintained by departments for group use and are NOT assigned to
specific individuals.

Cell Phone Policy & Procedures - 052808                                                       1
PROCEDURES:

Establishment and Payment of Allowance for Frequent Use of Cell Phones for Business
Purposes

If an employee's job duties include the frequent need for a cell phone, then the employee is
eligible for an allowance to cover cell phone expenses. The allowance may be requested using
the Cell Phone Allowance Request Form. The request may be made any time during the fiscal
year.

This allowance does not constitute an increase to base pay, and will not be included in the
calculation of percentage increases to base pay due to annual raises, job upgrades, etc.

Authorization

All initial requests for a cell phone allowance must be approved by the Department Director and
the Chief Administrative Officer.

The agency will provide authorized employees with an allowance for the business use of their
personal cell phone and payment of monthly service charges. This allowance will be provided
as taxable income to the employee, but it will not be considered part of the employee’s base
salary nor will it be considered in the calculation of pay increases.

Each employee requesting to receive an allowance for the business use of their personal cell
phone must complete a Cell Phone Allowance Request Form annually. The form must contain
the appropriate approval signatures prior to being forwarded to payroll for processing. The
payroll department must maintain a copy of the request form as documentation for audit
purposes.

Determination of Dollar Amount of Allowance

The dollar amount of the cell phone allowance has been calculated to cover the employee's
projected business-related expenses based upon past and projected usage patterns. The
allowance is being provided to cover the cost of the employee's monthly cell phone plan. The
allowance was determined based upon the anticipated amount of business usage of the phone
at an average of 250 minutes per month. The typical cost of a basic plan of 450 minutes with
major cellular providers is $40.

Based upon this assumption, it is anticipated that an employee will use his/her personal cell
phone an average of 250 minutes per month (55% of the total available plan minutes) for
business related calls. 55% of $40 equals $22 of business related expenses. 55% of the
monthly cost of a basic cell phone plan will be increased or “grossed up” to reimburse the
employee for applicable payroll taxes. The following standard tax rates were used to calculate
the monthly allowance: federal income taxes, 25%; State of California income taxes, 6%; Social
Security, 6.2%; and Medicare, 1.45%.

To obtain the full allowance amount, the IRS formula for “grossing up” taxable payments was
used. In other words, based upon a $40 per month cell phone plan, the monthly allowance,
including reimbursement for taxes, will be $35.00 calculated as follows:

Cell Phone Policy & Procedures - 052808                                                      2
A = Monthly Allowance
A = Plan Cost*.55 /1 – Applicable Tax Rates
A = $40*.55/1 - .25 - .045* - .062 - .0145
A = $22/.6285
A = $35.00

*Under the IRS formula, the state rate must be reduced by the federal rate (i.e., .06 – (.25 x .06)
= .045) since state taxes paid by an individual are deductible on his or her federal income tax
return.

It is the intent of this policy to provide a fair allowance to employees for the business use of their
cell phones while maintaining proper budget control. Unless the employee can demonstrate no
personal use, the allowance will not cover the total cost of the service plan. In such cases that
the allowance exceeds the total cost of the service plan, the allowance amount will be reduced
to the amount of the service plan. In addition, upgrades to basic equipment (special cosmetic or
technical features, etc.) or expected cell phone use unrelated to business activities is not
covered by this allowance.

Allowances will be provided in the form of a biweekly allowance toward the cost of maintaining
cell phone service for business purposes included on the employee’s pay check. The biweekly
allowance will not exceed $35.00 per month or $17.50 per pay period.

Allowance Qualifications

Employees may qualify for a cell phone allowance only if their Department Director has
determined it to be required for the performance for their job and the following criteria are met:

    •   The job requires the employee to be mobile with direct contact with other employees or
        business associates; or
    •   The job consistently requires timely and business critical two way communications for
        which there is no reasonable alternative technology; and
    •   There are available department funds to cover the cost of the allowance; and
    •   There is a completed Cell Phone Allowance Request Form with the appropriate
        authorizing signatures on file.

An employees’ eligibility based on these requirements must be documented by the Department
Director on a Cell Phone Allowance Request Form.

Justification of need must be specific as to why other means of communication provided by the
agency (i.e. office phones, email, etc.) are not adequate to meet the communication
requirements of the employee’s job.

Only one allowance for a single cell phone will be approved for each qualified employee.

Use of Cell Phone

The employee must retain an active cell phone contract as long as a cell phone allowance is in
place. Because the cell phone is owned personally by the employee, and the allowance
provided is taxable income, the employee may use the phone for both business and personal

Cell Phone Policy & Procedures - 052808                                                             3
purposes, as needed. The employee may, at his or her own expense, add extra services or
equipment features, as desired.

Use of the phone in any manner contrary to local, state, or federal laws will constitute misuse,
and will result in immediate termination of the cell phone allowance.

Documentation and Review Requirements

The Cell Phone Allowance Request Form and a copy of the employee's most recent cell phone
invoice or cell phone activation contract must be submitted with the Cell Phone Allowance
Request Form to initiate the allowance.

An annual review of employee business-related cell-phone use will be conducted to determine if
the existing cell phone allowance should be continued or discontinued.

Department Director and Employee Responsibilities

The Department Director is responsible for:

    •   determining whether the employee’s position requires a cell phone based upon his or
        her job responsibilities and providing appropriate documentation to support the cell
        phone allowance request;
    •   ensuring that employees are familiar with the requirements of the Cell Phone Policy &
        Procedures;
    •   approving the Cell Phone Allowance Request Form and forwarding to the Chief
        Administrative Officer for approval and forwarding to payroll for the processing;
    •   ensuring that department funding is available to cover the cost of the allowance;
    •   if allowance is being charged to a contract or grant, ensuring that the funding agency
        has specifically authorized the expenditure; and
    •   immediately notifying payroll when employees with allowances leave the agency.

Employees are responsible for:

    •   ensuring that he/she is familiar with the requirements of the Cell Phone Policy &
        Procedures prior to submitting a request for a cell phone allowance;
    •   providing his/her supervisor with requested information or documentation to support the
        expected business use of a personal cell phone; this documentation may include, if
        requested, copies of previous cell phone bills indicating the amount of minutes incurred
        on agency business;
    •   notifying his/her supervisor when there has been a significant change in the need for the
        business use of a cell phone allowance;
    •   paying all amounts due as agreed between the employee and the cell phone service
        provider;
    •   providing the agency with the cell phone number to be published in the agency phone
        directory; and
    •   notifying his/her supervisor within 48 hours of deactivation of the device. Note: An
        employee is prohibited from continuing to collect a cell phone service plan allowance
        when the device is no longer active or needed for the performance of the employee’s job



Cell Phone Policy & Procedures - 052808                                                        4
        responsibilities. Such abuse of the cell phone policy will result in disciplinary action up to
        and including termination.

Ownership of Cell Phone

A cell phone acquired according to the provisions of this policy is considered to be the personal
property of the employee, and any service contract entered into by the employee is personal to
the employee. The agency will have no obligation, make no guarantees with respect to such
contracts, and will not be held liable for misuse or abuse of any type. However, if the cell phone
provider will provide discounted rates, the agency will provide a letter to the cell phone provider
that the cell phone is to be used for the conduct of agency business. A phone purchase over
and above the promotional phones offered by the cell phone provider will be the responsibility of
the employee. If equipment is lost, damaged or malfunctioning, it will be the employee’s
responsibility to maintain/replace the equipment at his/her own expense.

Fees for Contract Changes or Cancellations

If, prior to the end of the cell phone contract, a personal decision by the employee, or employee
misconduct, or misuse of the phone, results in the need to end or change the cell phone
contract, the employee will bear the cost of any fees associated with that change or
cancellation.

If, prior to the end of the cell phone contract period, a departmental decision (unrelated to
employee misconduct) results in the need to end the cell phone contract, the agency will provide
a reimbursement of up to $100 of the cost of any fees associated with the cancellation. For
example, the employee's supervisor has changed the employee's duties and the cell phone is
no longer needed for business purposes. If the employee does not want to retain the current
contract, up to $100 will be provided towards the cancellation fees. A final bill showing the fees
must be submitted with an Employee Expense Reimbursement Form to obtain the
reimbursement.

Group Use Cell Phones (Department/Program Checkout/On-Call Phones)

Certain employees or groups of employees will have access to an agency-owned cell phone
where it would be impractical for the individuals to receive an allowance or due to security or
other operational considerations. Checkout/On-Call phones will be made available for
employees who are required to share a cell phone while on duty. When a checkout/on-call
phone is used by an employee, the employee will be required to document any personal use of
the phone and timely reimburse the agency for any personal calls made.

Payment of Cell Phone Bills for Group Use Cell Phones (Department/Program
Checkout/On-Call Phones)

Bills for group use cell phones must be signed each month by the Department Director under a
certification which states that all calls on the statement were made for business related to Unity
Care Group.




Cell Phone Policy & Procedures - 052808                                                             5
Reimbursement for Personal Use of Group Use Cell Phones (Department/Program
Checkout Phones)

    •   Employee reimbursement to the agency for personal calls is to occur within 30 calendar
        days of receiving notification of fees due.

    •   The employee will reimburse for costs related to each personal call either by paying
        actual charge, as it appears on the vendor invoice or by applying a “per minute cost”, if
        the call is within plan minutes. “Per minute cost” will be calculated by dividing the
        monthly calling plan charge by the minutes allowed, i.e. multiply the cost-per-minute
        times the business minutes used on the cell phone to determine the total owed the
        agency.

Reimbursement for Business Use of Personal Cell Phones not covered by the Allowance

If an employee's job duties do not include the frequent need for a cell phone, the employee is
not eligible for an allowance. Such employees may request reimbursement for the actual extra
expenses of business cell phone calls (but reimbursement for per-minute "air time" charges is
limited to the total overage charge shown on the invoice, i.e., expenses for minutes included in
the plan will not be reimbursed). The individual should make personal payment to the provider,
and then should submit a request for reimbursement.

    •   When an employee makes necessary business calls from a personal cell phone,
        reimbursement may be requested, excluding calling plan charges, equipment charges,
        taxes, surcharges and regulatory fees, using the Employee Expense Reimbursement
        Form.

    •   Employees must identify the business expenses on the detailed cell phone bill (and the
        purpose of each call) and submit the original bill with the request for reimbursement.
        Where an employee also needs the original receipt for tax or other purposes, a copy
        may be submitted.

    •   Employees may request reimbursement for the actual extra expenses of business cell
        phone calls (but reimbursement for per-minute "air time" charges is limited to the total
        overage charge shown on the invoice, i.e., expenses for minutes included in the plan will
        not be reimbursed).




Cell Phone Policy & Procedures - 052808                                                        6

								
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