Howard Rich's Blog

June 15, 2009

The IRS Phones Home

From the Wall Street Journal

With federal spending in 2009 at 28% of the economy and deficits heading north, Democrats are eyeing tax increases on everything from soft drinks to electricity to health benefits to charitable contributions. But the palm for creativity goes to the Internal Revenue Service, which is contemplating a new tax on the use of business cellphones.

The IRS believes that some percentage of the costs incurred by employees using company-provided wireless devices should count as a “fringe benefit” and thus be subject to taxation. Since workers inevitably end up taking personal calls or emails, the thinking goes, it’s only fair that they pay for the privilege. What’s next? Maybe a per-cup tax on office coffee, or targeting furtive visits to ESPN or Hulu on the office PC? As one wag put it on the Journal’s Web site, “It’s like charging for the use of the company washroom.”

The IRS isn’t proposing a new rule per se, merely planning to strictly enforce a 1989 law requiring workers using company phones for personal use to include the value of those calls as income. But in effect it’s the same thing, given the inherent difficulties of distinguishing the work from the personal when employees are expected to remain tethered to the office 24-7. The IRS suggests that businesses automatically assign 25% of annual phone expenses as a taxable liability — unless employees could provide proof that they used other forms of communication during work hours. We think most taxpayers will agree that preparing for April 15 is stressful enough already.

The political class may come to regret stepping into this minefield, however, and not only because this is precisely the sort of common non-sense that incites tax revolts. It’s one thing if the next Tom Daschle forgets to pay taxes on his company chauffeur. But it’ll be quite another if the next nominee goes down for taking too many personal calls without giving the government its due.

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