Employer-provided cell phones are no longer a taxable, according to the IRS. That means employees don’t have to pay federal income tax on any personal use of their phones—and you can quit keeping track of personal-use minutes for payroll purposes.
To be tax-free, phones must be provided so employees can stay in touch with the office at all times or contact clients while out of the office. Phones provided as bonus awards or recruiting inducements are still taxable.
Read IRS Notice 2011-72, which explains the change, at www.irs.gov/pub/irs-drop/n-11-72.pdf.