There are several reasons why you may want to provide cell phones to your employees, or reimburse them for the business use of their cell phones. Whether or not the benefit or reimbursement is taxable to them hinges on “business purpose.” IRS will treat the benefit or reimbursement as nontaxable if your reason for providing it is due to:
- Your need to contact the employee at all times for workrelated emergencies;
- Your requirement that the employee be available to speak with clients when away from the office; and,
- Your employee’s need to speak with clients located in other time zones at times outside of the normal work day.
The amount of reimbursement must be reasonable and not be more than the employee’s actual expense as it relates to the needs of your business. Although the IRS doesn’t require recordkeeping of business use in order to receive this taxfree treatment, some form of documentation relating to the noncompensatory nature of the benefit or reimbursement is advised, just to be on the safe side.