fringe benefits
Blog Tim on TEM

Are Corporate-Provided Smartphones a Taxable Benefit?

Telecom and taxes are inseparable. In the United States, fringe benefits and surcharge burdens can add up to 40% more cost to some telecom invoices.

That’s why employers must consider one primary type of tax — the fringe benefit tax — before handing out smartphones to employees. The Internal Revenue Service (IRS) can update guidance on fringe benefits at any time. And, the IRS already addresses cell phones via IRS Publication 15-B (2019), Employer’s Tax Guide to Fringe Benefits.

So, do corporate-provided smartphones count as taxable fringe benefits?

Two Key Considerations

Before answering this question, an organization must make two decisions. Why should it provide telecom devices for employees in the first place? And, to what extent will employees enjoy personal benefits from their employer-provided smartphones?

The first determination helps the IRS ensure provided devices are non-compensatory — or intended for business use only. If that’s the case, smartphones and telecom devices aren’t subject to taxation. However, if that’s not the case, the IRS moves to decision two.

If these devices deliver little benefit to individual employees, the IRS doesn’t consider them taxable benefits either. Instead, they view these telecom tools as a de minimis benefit because they deliver such a small personal value to employees.

What Makes Smartphones Fringe Benefits?

According the IRS, “Cell phones provided to promote goodwill, boost morale, or attract prospective employees,” are subject to the fringe benefit tax.

IRS rules are always subject to a variety of factors. So, before making any business technology decision you should consult a trusted tax resource. Of course, AOTMP® can help, too.

Email me today to learn more about these rules and how to prepare your organization for tomorrow’s telecom environment.