Phone Bill Reimbursement - PDF

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					Taxability of Employer
Provided Cellular
Telephones and Pagers

July 19, 2006 AO/FO Meeting
UH Cellular Phone
Policy

  Discussion for October 2005
        AO/FO Meeting
Discussion Items

 How many departments pay for
 employee phones?
 What criteria is used to authorize the
 phone?
 Reimbursement policy if any?
 Plan selection criteria?
 Should UH develop a policy?
Tax Issues

 Any personal use of employer provided
 cellular phones and pagers is
 taxable/reportable income
 Requires documentation of business
 usage in order for the purchase and
 operational cost to be an allowable
 deduction and not included as income to
 the individual.
Tax Issues (continued)

 Adequate records - documentary evidence
 (account book, diary, log, etc) which records
 every call and its business purpose that is
 made or received on an employer-provided cell
 phone must be kept by the cell phone holder
 and audited by departmental approvers.
 IRS requirements include “amount of each
 separate expenditure, the amount of
 business/investment use, the date of the
 expenditure or use, and the business or
 investment purpose”
Tax Issues (continued)

 Only the documented business use
 portion is excluded. Employee’s
 personal use is taxable income.
Example 1
 A university provides an employee a
 cellular phone for business purposes.
 The university’s written policy prohibits
 personal use of the phone. The
 university routinely audits the
 employee’s phone billings to confirm that
 personal calls were not made. No
 personal calls were actually made by the
 employee. The business use of the
 phone is not taxable to the employee.
Example 2
  A university provides an employee a cellular
 phone for business purposes. The
 university’s written policy states that the
 phone is not intended for personal use, and
 requires reimbursement from the employee
 for any personal calls. The university
 routinely audits the employee’s phone
 billings to ascertain personal calls made.
 The employee reimburses for all personal
 calls made. The business use of the phone
 is not taxable to the employee.
Example 3
A university provides an employee a cellular
phone for business purposes. The
university’s written policy prohibits personal
use of the phone. The university does not,
however, audit the employee’s phone
billings to confirm only business use. The
Fair Market Value (FMV) of the phone (one
time value) plus the monthly phone service
charge (on going) are taxable, reportable
income.
Example 4
A university provides an employee with a
cellular phone and pays the monthly
charges. The university requires the
employee to highlight personal calls on the
monthly bill. The university includes the
direct charges for personal use and a pro
rata share of monthly fees in the wages of
the employee. The business use portion of
the phone is not taxable to the employee.
Example 5
An university allows an employee to use a
personally owned cellular phone for university
business. The university has established a written
policy on the use and manner of reimbursement for
such phones. The employee submits a signed copy
of the employee’s cellular bill highlighting work-
related calls for which the employee is requesting
reimbursement. The university reimburses the
identified work calls on a pro rata share of the
monthly fees after auditing the bill. The
reimbursement of business related calls is not
taxable to the employee.
  Example 6
A university allows an employee to use a
personally owned cellular phone for university
business. The university has established a
written policy on the use and manner of
reimbursement for such phones. The university
pays a flat rate monthly allowance to the
employee for the use of the phone. The
university does not require documentation
identifying the personal and business use of the
phone. The entire amount of the monthly
allowance is taxable, reportable income.
Policy Alternatives

1. Prohibit personal use of UH provided
   equipment.
2. Personal use permitted.
  1.   Employee reimburses
  2.   Reported as income
3. Flat monthly allowance.
Documentation Requirements

1. Prohibit personal use of UH provided
   equipment. (UH must review         monthly statements
   to confirm no personal use)
2. Personal use permitted. (Detailed
   documentation and review required)
   1.   Employee reimburses
   2.   Reported as income
3. Flat monthly allowance. (No documentation or
   review required. Entire allowance is taxable/reportable)
What Have Other Universities
Done?
 Discontinued university owned cell
 phone program. Provide allowances
 treated as taxable income.
   Ohio University
   University of Utah
   Claremont Graduate University
 University of Wisconsin – Madison
   Prohibits personal use
Next Steps?

 Develop and implement policy
   Who should take the lead?
   What are the issues that need to be
   addressed? Union? Departmental?
 What do we do in the meantime?

				
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