IRS Now Wants to Repeal Cell Phone Tax

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The U.S. Internal Revenue Service is now recommending that a complicated law that would tax personal usage of business cell phones be repealed, after the agency caused an uproar last week with attempts to simplify the law.

On Tuesday, IRS Commissioner Doug Shulman asked Congress to make it clear that neither businesses nor employees will need to pay taxes on personal use of cell phones provided by employers.

Just last week the IRS requested public comments on ways to clarify the decades-old law. The request created an uproar because it implied that the largely ignored rule would now be enforced.

While workers are unenthusiastic about any new tax, this one might be particularly burdensome for both employees and employers because of the difficulty of tracking the personal use of company phones.

In its request for comments last week, the IRS suggested three possible ways to simplify enforcement of the law, including requiring people to prove that they have another cell phone that they use during the day for personal use. Alternatively, the IRS suggested that businesses might assume that 75 percent of employee use of the phones is for work and the rest for personal matters. The third method would let employers use an approved statistical sampling method to measure employees' personal use of their business cell phones.

But now the IRS says the law shouldn't be on the books. "The passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete," Shulman wrote.

He also said that last week's request for comment wasn't meant to imply that the IRS hoped to revive the law. "Some have incorrectly implied that the IRS is 'cracking down' on employee use of employer-provided cell phones. To the contrary, the IRS is attempting to simplify the rules and eliminate uncertainty for businesses and individuals," he wrote.

The CTIA wireless association applauded the IRS' latest move. "A repeal of the archaic listed property rule is the most sensible and fair action to take on behalf of every American who uses their wireless device for professional and personal purposes," Steve Largent, president and CEO of CTIA, said in a statement.

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