Cell Phone Tax Reported on the Way Out

February 1, 2010 (PLANSPONSOR.com) – The law classifying as taxable income personal calls made on an employer-provided cell phone appears headed for the legislative trash heap.

The Associated Press reported that the Obama Administration will suggest in its 2011 Budget that the cell phone tax be repealed. Action on a similar move by the administration in June 2009 was delayed because of work on the health-care reform bill (see IRS Says Cell Phone Law Obsolete). 

An unidentified administration official told the AP that taxpayers would be off the hook for all of 2010 if the cell phone tax is repealed this year.

The 1989 law imposed the tax similar to what is in place for other employer fringe benefits such as the use of a company car. However, the AP said, the dividing line between personal and employer use has blurred in recent years as technology has allowed workers to accomplish more work-related tasks on their cell phones.

Some employers have faced big tax bills after failing to comply with the law, the AP said. 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.