Dow Jones reported that the Internal Revenue Service (IRS) interprets current law to require the inclusion of the value of a work cell phone in employee pay, unless detailed records are kept establishing that the phone is not used for personal calls.
The IRS withdrew a 2009 proposal spelling out how employers might treat cell phones for tax purposes. At that time it asked Congress for legislation clarifying that cell phones should not be treated as a taxable fringe benefit (Cell Phone Tax Reported on the Way Out).
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.