We are switching to a reimbursement program versus a company provied  Phone/Blackberry

Has anyone else done this and would you be willing to share your reimburement $  and experience

The management of  the phones is taking too much time and everyone wants something different

 We are looking at by position differences 

Thanks

We are in the process of implementing a new cell phone policy/procedure.  We have selected three models to be used company wide. The first is a low end model which will be given to all employees unless they require internect access.  It's extremely basic!

The 2nd model will be issued to field employees who need internet capabilities but not access to our company servers.  This is a very sturdy phone which should stand up under field conditions.

The 3rd model is a "smart" phone to be issued to those who need access to company servers and will sync up with their computers.  The 2nd and 3rd models are only given out to those preapproved by upper management. 

We hope to eliminate the issues of everyone wanting something different.  It also will help our IT dept since this should standardize the models which need to sync up to our network.  It was becoming a nightmare to provide assistance with multiple types of smart phones.

LOL! I'd like to see the IRS auditor trying to determine which calls were personal vs. business.

Is the cost it would take a company to track these worth the benefit derived (if any)? Personally, I'd be looking for a new accountant if mine were to suggest something like that. Please tell me the IRS has BETTER THINGS TO DO!

On the flip-side, we've been advised by our accountant that if the company owns the phones and the employee can use it for both business and personal calls, then the company must document which calls were which. The personal calls are taxable income to the employee and not deductible by the company. Any comments on this interpretation?

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I alluded to this above. As I understand tax policy your accountant is correct with regards to the personal usage being taxable as income unless some other exclusion applies. There is at least the possibility of the de minimis exclusion depending on the amount of personal use, or, if the personal usage falls under the no additional cost (can't remember the technical jargon off the top of my head) exclusion it could possibly be excluded from income as well.

An example would be if you provide a phone that has a base amount of minutes to an employee, and the employee uses the cell phone for business and personal usage, but never exceeds the base amount of minutes, no additional cost is incured probably making the benefit (persoanl usage) excludable from income. Of course as a practical matter, most of us never encounter the minimum minutes not exceeded problem. Exactly these issues are why most advise I've read regarding the matter recommend prohibiting all personal use of business property, whether its cell phone, company laptop, company desktop at a work from home location, or a company vehicle, etc.

The other way to avoid the personal use as income issue is to require employees to reimburse the company for additional costs resulting from personal usage.

In addition, if one accountants for personal usage of the phone as income on a W-2, and pays all appropriate employment taxes on such, it seems to me that your accountant might be wrong on the deductability of this expense. It seems to me it should be deductible as a wages and benefits expense, as opposed to a utility or whatever else one usually expenses cellular usage, but I haven't looked into the documentation for that.

MPAP

There's another angle besides the one mentioned above (with all of the tracking of reimbursements and the eventual accounting nightmare).

How does your company support these devices if everyone has their own model? I don't know about you, but our project managers and field supervisors aren't necessarily the most technically saavy people when it comes to Blackberries or mobile telephones.

Our IT Department feels that it would be a nightmare to have different laptops, blackberries or mobile communications devices to integrate and try to support in our system. Also, now you turn a productive employee into one spending a lot of time trying to figure out "How does this thing work?" or "Why doesn't this thing work?"

The point of these devices is for us, the employer, to improve productivity. It's not to have the "latest and greatest' gadget, It's to have one that gives management the tools with which they need to be productive and make money.

Be careful before you head down that road. There are a lot of hidden costs associated with this kind of decision.

My first question is are you sure that providing cash reimbursement as opposed to the actual phone will save you any time managing the benefit? According to the IRS Publication 15-B Employer's Tax Guide to Fringe Benefits, 2. Fringe Benefit Exclusion Rules, Working Condition Benefits, page 21:

"This exclusion also applies to a cash payment you provide for an employee's expenses for a specific or prearranged business activity for which a deduction is otherwise allowable to the employee. You must require the employee to verify that the payment is actually used for those expenses and to return any unused part of the payment".

Accordingly, your employees must provide you with an accounting for where the cash payment goes, and return any unused portion. If you think making sense of cell service in your company account is a nightmare, imagine documentation from five different cell phone companies, and who knows how many different types of service plans. In addition, while I suspect that the IRS technically considers any personal use of a company provided cell phone as a potentially taxable fringe benefit, it still might qualify depending on the amount of personal usage, as untaxable under the De Minimis Benefits rules, whereas cash payments never do. See IRS Publication 15-B Employer's Tax Guide to Fringe Benefits, 2. Fringe Benefit Exclusion Rules, De Minimis (Minimal) Benefits, page 8:

"Cash and cash equivalent fringe benfits(for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit."

Given these two passages, I would be particularly careful about making the switch you describe and would make sure to consult your tax professionals to insure you institute proper documentation procedures if you decide to procede. Failure to do so could result in a tax liability for not only income tax withholding but also for your share of social security, medicare and unemployment taxes as well.

The other issue which troubles me about such a decision is that your company hands over to its employees the right to control the business contact numbers most familiar to your clients or vendors. Imagine if you will, an employee who leaves your company for whatever reason. Also imagine that they have been receiving a high volume of calls from your clients. Imagine this ex employee now works for your competitor. If you don't own the phone and number on which your business has previously been conducted, you have no way to prevent your valued customer from pressing their speed dial and reaching what is now an employee for your competition.

Both of these ideas are merely my reaction to and attempt to forsee potential pitfalls of the course of action you propose. They are not an actual relation of problems I have actually encountered. I defer to any taxation authority, or legal expert who has a differing experience or ideas on how to handle these potential complications.

MPAP