Cell phones — change in tax treatment

As part of the Small Business Jobs Act of 2010 that President Obama signed On September 27, 2010, cell phones will no longer be considered “listed property” subject to more stringent reporting requirements.

“Listed property” is certain personal property that, by its nature, has the ability of personal use as well as business use. Examples of listed property include certain automobiles, boats, and computers, and up to now, cell phones. Because of the possibility of personal use of business property, the rules regarding depreciation of such property are more involved and consideration of any personal use is required. Further, if personal use occurs, an entity/the employer is required to report that personal use as compensation to the individual/employee.

As cell phones have become more common place and owned by individuals personally (versus owned by the employer), the potential occurrence of personal use of business-owned cell phones has diminished dramatically. While the IRS is expected to provide further guidance, the hope is that company cell phones will be considered a de minimis fringe benefit that is not subject to a personal use reporting requirement.

The change in reporting – that is the no longer considered listed property – is/was effective January 1, 2010.