Cellphones

Question: I just got a new cellphone contract through the church for 2 years. What do we do?

Answer: You need to know that the personal use of a company owned cell phone is taxable to the individual. There are a few options to handling the taxability. You can:

• Simply add the total amount of the monthly cellphone bills for the year to your W-2 as taxable income.
• Detail out the cost of personal calls each month and reimburse the church for that portion.
• Detail out the cost of personal calls each month that are personal and only that portion is taxable and would be added to your W-2. However, if you have a fixed amount of minutes with the plan then this does not work.
• Detail the cost of personal calls for 3 months and average the amounts and then determine an annual amount using the average and add it to your W-2.
• Receive a flat allowance (stipend) each month to cover what ever portion might be estimated as personal. This amount is taxable and added to your W-2. This has proven to be the simplest idea.
• Carry a personal cellphone also and only use it for personal calls.

Side Note: The IRS has determined that any calls made to your family or home are considered personal and taxable. I agree this does not make sense. If you call your family or home from your desk phone you are not taxed for it. However, if you do it from a company owned cellphone it is considered personal and taxable. It seems that the IRS says you derive a personal benefit from the ability to do that on the cellphone.