Transcript Slide 1

WVAHEFO Spring 2011 Conference
Can You Hear Me Now
OR…
How WVU Learned to Love the IRS and it’s
Cell Phone Carrier
Can You Hear Me Now
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The IRS
WVU Policy
Guidelines
Exceptions
University Responsibility Accounts
Personal Responsibility Accounts
Q&A
The IRS
• The Small Business Jobs Act (SBJA) removed “cell
phones” as “listed property” retroactively to January
1, 2010.
• The law does NOT provide, however, that “de
minimis” personal use is non-taxable.
• The IRS retains the authority to continue to
tax employer provided cell phones on audit.
The IRS
• De minimis fringe benefits include property or services, provided by an
employer for an employee, with a value so small that accounting for it is
unreasonable or administratively impractical. The value of the benefit is
determined by the frequency it is provided to each individual employee,
or, if this is not administratively practical, by the frequency provided by
that employer to the workforce as a whole. IRC §132(e); Reg. §1.132-6(b)
• Example: An employer gives employees snacks each day valued at one
dollar. Even though small in amount, the benefit is provided on a regular
basis and is, therefore, taxable as wages. The law does not specify a dollar
threshold for benefits to qualify as de minimis.
• http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf
The IRS – What Employers Can Do
• Limit the personal use of cell phones to occasional personal
use during business and peak hours, and exclude the personal
use as a de minimis fringe benefit.
• Limit the use of business cell phones to general business use
and require year-end compliance certifications and tax
accordingly.
• Issue cell phones only to employees for whom a cell phone is
necessary to “properly perform their duties,” and tax
consistent with the legislative history applicable to the
personal use of automobiles.
The IRS – What Employers Can Do
• Allow personal use, deem a certain amount of the cost of the
cell phone and usage as personal, and include a specified
dollar amount in every employee’s wages.
• Adopt and enforce a policy of no personal use (and possibly
require the employee to show that the employee has another
cell phone for personal use).
• Limit personal use and only tax those employees who certify
at year-end that their personal use exceeds a stated
percentage.
WVU Policy
GUIDELINES
• The university may provide for payment of Cellular Telephone Service for
university employees when appropriate to support university business and
where funding is available in the employing unit.
• The appropriate level of phone service is determined in the employing
unit and is based on university needs, employee duties and budgetary
concerns.
• Service plans will be reviewed annually to ensure the plans are needed to
conduct the business of the University.
• Departments and employees must obtain service from the current
contract provider unless there is a fully documented exception.
• Cellular Telephone services and equipment may not be charged to grants.
WVU Policy
EXCEPTIONS
• Employees and/or Departments may obtain service from a non-contract
cellular provider if:
– The contract service provider cannot provide reliable cellular service
to the geographic locations (including international locations) required
by university operations.
– The contract service provider cannot provide certain equipment or
services that may be required by university operations. Examples of
such equipment or services may include but not be limited to certain
data services, security requirements or enhancements, clinical or
operational applications required to perform work requirements,
public safety, and technical support requirements, etc.
WVU Policy
WVU will provide “University Responsibility Accounts”
to employees who qualify for a “Business Use Only
Account”, but that is the only type of cell phone service
that qualifies as non-taxable, and can be paid by direct
invoice to WVU. Eligibility for a URA account is
determined by duties and responsibilities, and not by
position or title.
WVU Policy
• University Responsibility Accounts (URA) are provided only to
those accounts where:
– Phones are left on site and/or are shared with other employees to
conduct university business;
– The employee is “on call” to provide technical support or customer
service outside the office or from home;
– The employee is required to have service by regulations that apply to
their departments operations, e.g., NCAA;
• Accounts are audited monthly by the appropriate business
office and employees are required to reimburse the University
for any and all Personal Calls at the rate of $.10/minute.
WVU Policy
All other cellular telephone service, is considered a
taxable benefit to the employee, and will be converted
to a “Personal Responsibility Account”. WVU will
provide a monthly “Allowance” to reimburse and tax all
employees who are required to maintain cellular
telephone service for business use according to IRS
regulations.
WVU Policy
• Personal Responsibility Accounts (PRA) – for Employees with
Business and Personal Use
– Deans, Directors, and their authorized designees, must
provide all employees for whom they require PRA service
with a signed authorization form;
– The Allowance amount will be added to each employee’s
payroll and taxed accordingly.
Background… Policy
WVU Allowance Calculation
Cellular Add-Ons
WVU Payroll Deductions
Regulatory
Total
WVU Billing Federal USF @ WV Sales Tax
E-911
Cost Recovery
Estimated
Rate
3.12%
@ 6.00%
Recovery Fee
Fee
Cellular Billing
Plan Description
Payroll
Allowance
Amount
FICA Medicare
FWT @ 15%
@ 7.65%
SWT @ 3%
Estimated Net
Pay
National 250 (no m2m, UNW, incoming calls)
$
25.00
$
0.78
$
1.50
$
0.96
$
3.00
$
31.24
$
42.00
$
3.21
$
6.30
$
1.26
$
31.23
National 450 (no UNW)
$
32.00
$
1.00
$
1.92
$
0.96
$
3.00
$
38.88
$
52.00
$
3.98
$
7.80
$
1.56
$
38.66
National 650
$
38.00
$
1.19
$
2.28
$
0.96
$
3.00
$
45.43
$
61.00
$
4.67
$
9.15
$
1.83
$
45.35
National 900
$
46.00
$
1.44
$
2.76
$
0.96
$
3.00
$
54.16
$
72.00
$
5.51
$
10.80
$
2.16
$
53.53
National 1350
$
63.00
$
1.97
$
3.78
$
0.96
$
3.00
$
72.71
$
97.00
$
7.42
$
14.55
$
2.91
$
72.12
National Unlimited
$
80.00
$
2.50
$
4.80
$
0.96
$
3.00
$
91.26
$
122.00
$
9.33
$
18.30
$
3.66
$
90.71
Windows Mobile® Data Only
$
23.00 $
0.72
$
1.38
$
0.96
$
3.00
$
29.06
$
39.00
$
2.98
$
5.85
$
1.17
$
29.00
BlackBerry® Data Only
$
35.00 $
1.09
$
2.10
$
0.96
$
3.00
$
42.15
$
56.00
$
4.28
$
8.40
$
1.68
$
41.64
Windows Mobile® With Voice
$
19.95
$
0.62
$
1.20
$
21.77
$
29.00
$
2.22
$
4.35
$
0.87
$
21.56
BlackBerry® With Voice
$
32.00
$
1.00
$
1.92
$
34.92
$
46.00
$
3.52
$
6.90
$
1.38
$
34.20
43.12
5GB Modem (PC Card)
$
40.00 $
1.25
$
2.40
$
43.65
$
58.00
$
4.44
$
8.70
$
1.74
$
250 Outgoing Text Messages/Month
$
4.95 $
0.15
$
0.30
$
5.40
$
7.00
$
0.54
$
1.05
$
0.21
$
5.20
750 Outgoing Text Messages/Month
$
9.95 $
0.31
$
0.60
$
10.86
$
14.00
$
1.07
$
2.10
$
0.42
$
10.41
Unlimited Outgoing Text Messages/Month
$
19.95 $
0.62
$
1.20
$
21.77
$
29.00
$
2.22
$
4.35
$
0.87
$
21.56
20 Outgoing Picture Messages/Month
$
2.95 $
0.09
$
0.18
$
3.22
$
4.00
$
0.31
$
0.60
$
0.12
$
2.97
50 Outgoing Picture Messages/Month
$
5.95 $
0.19
$
0.36
$
6.49
$
8.00
$
0.61
$
1.20
$
0.24
$
5.95
100 Outgoing Picture Messages/Month
$
10.95 $
0.34
$
0.66
$
11.95
$
16.00
$
1.22
$
2.40
$
0.48
$
11.90
Q&A