Q: We currently reimburse employees who use their own cellphones to make business calls, but then add back those amounts as taxable pay. HR wants us to stop this practice and make those reimbursements a tax-free. Don’t the accountable plan rules apply here?
A: No. Employees may be reimbursed tax free for the business use of their cellphones without having to submit the usual detailed supporting documentation that the accountable plan rules require.
Catch: Employees’ calling/data plans must be reasonably related to your business needs (no fancy satellite phones) and reimbursements can’t exceed expenses, so they should still submit their monthly bills to you.
Flip side: You would probably have to tax employees to whom you give cash allowances, without proof that they used their phones for business.
(Editor's note: A step-by-step here.)compliance guide to each pay period, month and calendar quarter of the year is now available. Download it free